SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934

     For the Fiscal Year Ended December 31, 2000


[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 FOR THE TRANSITION PERIOD FROM _________ to __________

                         Commission File Number: 0-31847


                        LAWRENCE FINANCIAL HOLDINGS, INC.
                 (Name of small business issuer in its charter)


            Maryland                                       31-1724442
(state or other jurisdiction of                (IRS employer identification no.)
 incorporation or organization)


 311 South Fifth Street, Ironton, Ohio                       45638
(address of principal executive offices)                   (zip code)


         Issuer's telephone number, including area code: (740) 532-0263
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
Yes    x      No
    ------       -----

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements  incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. x
                                     ---

         The issuer's gross revenues for the fiscal year ended December 31, 2000
were $8,603,000.

         The aggregate  market value of the voting and non-voting  common equity
held by  non-affiliates  was  $8,194,849  based upon the  average of the bid and
asked price ($11.59 per share) as quoted on the OTC-Bulletin  Board on March 20,
2001. Solely for purposes of this calculation,  the shares held by the directors
and officers of the registrant are deemed to be held by affiliates.

         The number of shares outstanding of the registrant's common stock as of
March 15, 2001 was 775,827.

                   Documents incorporated by reference: None.

Transitional Small Business Disclosure Format (check one):  Yes        No   X
                                                               ------     -----

<PAGE>



                                      INDEX

                                     Part I
                                                                            Page

Item 1.    Description of Business............................................3
Item 2.    Description of Property...........................................30
Item 3.    Legal Proceedings.................................................30
Item 4.    Submission of Matters to a Vote of Security Holders...............30

                                     Part II

Item 5.    Market for Common Equity and Related Stockholder Matters..........31
Item 6.    Management's Discussion and Analysis..............................32
Item 7.    Financial Statements..............................................41
Item 8.    Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure ............................41

                                    Part III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act...............41
Item 10.   Executive Compensation............................................42
Item 11.   Security Ownership of Certain Beneficial Owners and Management....45
Item 12.   Certain Relationships and Related Transactions....................46
Item 13.   Exhibits and Reports on Form 8-K..................................47


<PAGE>



         This report contains certain  "forward-looking  statements"  within the
meaning of the federal  securities  laws.  These  statements  are not historical
facts,  rather statements based on Lawrence Financial  Holdings,  Inc.'s current
expectations  regarding  its business  strategies,  intended  results and future
performance. Forward-looking statements are preceded by terms such as "expects,"
"believes," "anticipates," "intends" and similar expressions.

         Management's  ability to predict  results or the effect of future plans
or strategies is inherently uncertain. Factors which could affect actual results
include interest rate trends, the general economic climate in the market area in
which  Lawrence  Financial  Holdings,  Inc.  operates,  as well  as  nationwide,
Lawrence  Financial  Holdings,  Inc.'s  ability to control  costs and  expenses,
competitive products and pricing,  loan delinquency rates and changes in federal
and state  legislation  and  regulation.  These factors  should be considered in
evaluating  the  forward-looking  statements  and undue  reliance  should not be
placed  on  such  statements.  Lawrence  Financial  Holdings,  Inc.  assumes  no
obligation to update any forward-looking statements.


                                     PART I

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

General

         Lawrence Financial Holdings, Inc. ("Lawrence Financial"), headquartered
in Ironton,  Ohio,  was organized as a Maryland  business  corporation in August
2000 to become the holding company for Lawrence  Federal Savings Bank ("Lawrence
Federal") in connection  with the conversion of Lawrence  Federal from mutual to
stock form of  ownership.  The  conversion  was  completed  on December 28, 2000
through the sale of 775,827  shares of common  stock by Lawrence  Financial at a
price of $10.00 per share. As a result of the conversion,  Lawrence Federal is a
wholly owned subsidiary of Lawrence Financial.

         Lawrence   Federal   operates   as   a   community-oriented   financial
institution,  specializing in the acceptance of retail deposits from the general
public in the areas surrounding its five full-service  banking offices and using
those funds,  together with funds generated from  operations and borrowings,  to
originate  loans.  The  principal  lending  activity of Lawrence  Federal is the
origination of mortgage loans for the purpose of purchasing or refinancing  one-
to four-family  residential  property.  Lawrence Federal also originates  mobile
home loans, a variety of consumer  loans and  multi-family  and commercial  real
estate  loans.   Lawrence  Federal  originates  loans  primarily  for  long-term
investment  purposes.  Lawrence Federal's revenues are derived  principally from
the generation of interest and fees on loans originated and, to a lesser extent,
interest and dividends on  investments.  Lawrence  Federal's  primary sources of
funds are deposits, principal and interest payments on loans and investments and
advances from the Federal Home Loan Bank of Cincinnati.

Market Area

         Lawrence  Federal   conducts   business  in  southern  Ohio  from  five
full-service  offices.  Lawrence  Federal's  main  office is in  Ironton,  Ohio.
Ironton is in Lawrence County, which is the southernmost county in Ohio. Located
on the Ohio River in the heart of the tri-state area of Ohio,  Kentucky and West
Virginia,  Ironton is the county  seat of  Lawrence  County.  Three of  Lawrence
Federal's branch offices are also in


                                        3

<PAGE>



Lawrence County and the fourth is in adjacent Scioto County. Lawrence and Scioto
Counties,  Ohio  constitute  Lawrence  Federal's  primary market area.  Lawrence
Federal  also serves  depositors  and  borrowers  in Greenup and Boyd  Counties,
Kentucky and Cabell County, West Virginia.

         Lawrence  Federal's  market area is  predominantly  rural.  The largest
employment  sectors  in this  area are  services,  wholesale  retail  sales  and
manufacturing.  Lawrence  Federal's  market  area has a lower per capita  median
household income when compared to Ohio and the United States.  While the economy
in  Lawrence  County  has  generally  been good in recent  years,  recent  plant
closings have resulted in job losses. Over the past several years,  unemployment
in Lawrence County has been greater than the state and national rate.

Competition

         Lawrence  Federal  faces  intense  competition  for the  attraction  of
deposits  and  origination  of  loans  in  its  market  area.  Its  most  direct
competition  for  deposits  has  historically  come from the  several  financial
institutions  operating  in  Lawrence  Federal's  market  area and,  to a lesser
extent, from other financial service companies,  such as brokerage firms, credit
unions and insurance companies.  Lawrence Federal's  competition for loans comes
primarily from financial institutions in its market area, and to a lesser extent
from other financial service providers,  such as mortgage companies and mortgage
brokers. Additionally,  competition for loans may increase due to the increasing
number of  non-depository  financial  service  companies  entering  the mortgage
market, such as insurance companies,  securities companies and specialty finance
companies.  Lawrence Federal expects  competition to increase in the future as a
result of legislative,  regulatory and technological  changes and the continuing
trend  of  consolidation  in  the  financial  services  industry.  Technological
advances,  for example,  have lowered barriers to entry, allowed banks to expand
their  geographic  reach by  providing  services  over the  Internet and made it
possible for  non-depository  institutions  to offer  products and services that
traditionally  have been provided by banks.  The  Gramm-Leach-Bliley  Act, which
permits affiliation among banks, securities firms and insurance companies,  also
will change the  competitive  environment  in which  Lawrence  Federal  conducts
business.  Some of the  institutions  with which Lawrence  Federal  competes are
significantly  larger than Lawrence Federal and,  therefore,  have significantly
greater resources.  Due to its relatively small size, Lawrence Federal has fewer
resources  to  devote  to  marketing  and is  less  able to  take  advantage  of
technological  advancements.  Competition  for deposits and the  origination  of
loans could limit Lawrence Federal's growth in the future.

Lending Activities

         General.  Lawrence Federal's loan portfolio  primarily consists of one-
to four-family mortgage loans,  indirect auto loans, and mobile home loans. To a
lesser degree,  Lawrence Federal's loan portfolio also includes multi-family and
commercial real estate loans and a variety of direct consumer loans.

         Lawrence  Federal's loans are subject to federal laws and  regulations.
Interest rates charged by Lawrence Federal on loans are affected  principally by
Lawrence  Federal's  current  asset/liability  strategy,  the demand for various
types of loans, the supply of money available for lending purposes and the rates
offered by  competitors.  These  factors  are, in turn,  affected by general and
economic conditions, monetary policies of the federal government,  including the
Federal  Reserve  Board,  legislative  tax policies and  governmental  budgetary
matters.



                                        4

<PAGE>


         Loan Portfolio  Analysis.  The following table presents the composition
of Lawrence  Federal's loan portfolio at the dates  indicated.  Lawrence Federal
had no concentration of loans exceeding 10% of total loans receivable other than
as disclosed below.
<TABLE>
<CAPTION>
                                                               At December 31,
                                               -----------------------------------------------
                                                        2000                     1999
                                               ----------------------    ---------------------
                                                            Percent                  Percent
                                                  Amount    of Total      Amount     of Total
                                               ----------- ----------    ---------  ----------
                                                           (Dollars in thousands)
<S>                                              <C>             <C>       <C>           <C>
Real estate loans:
   One- to four-family......................     $  51,298       49.8%     $51,606       66.6%
   Multi-family and commercial..............         9,371        9.1        5,962        7.7
   Other....................................           389        0.4          471        0.6
                                               -----------     -------   ---------      -----
      Total real estate loans...............        61,058       59.3       58,039       74.9
Consumer loans:
   Automobile...............................        17,204       16.7        2,268        2.9
   Other....................................         8,969        8.7        5,406        7.0
                                                 ---------    -------    ---------     ------
      Total consumer loans .................        26,173       25.4        7,674        9.9
                                                  --------     ------    ---------     ------
Mobile home loans...........................        15,804       15.3       11,759       15.2
                                                  --------     ------     --------     ------
      Total loans...........................       103,035      100.0%      77,472      100.0%
                                                                =====                   =====
Less:
   Net deferred loan origination costs......         3,125                   1,898
   Allowance for loan losses................          (775)                   (589)
                                                   --------                -------
   Total loans, net..........................      $105,385                $78,781
                                                   ========                =======
</TABLE>

         The following table presents  certain  information at December 31, 2000
regarding the dollar amount of loans  maturing in Lawrence  Federal's  portfolio
based on their contractual terms to maturity or scheduled amortization, but does
not include potential prepayments. Demand loans, loans having no stated schedule
of repayments  and no stated  maturity,  and overdrafts are reported as becoming
due in one year or less. Loan balances do not include undisbursed loan proceeds,
net deferred loan origination costs and allowance for loan losses.
<TABLE>
<CAPTION>
                                                                  At December 31, 2000
                                     -------------------------------------------------------------------------------
                                                  Multi-
                                     One- to    Family and
                                     Four-      Commercial        Other                                      Total
                                     Family     Real Estate    Real Estate     Consumer      Mobile Home     Loans
                                     ------     -----------    -----------     ---------     -----------    --------
                                                                     (In thousands)
<S>                                   <C>         <C>             <C>          <C>             <C>        <C>
Amounts due in:
   One year or less.............      $   601     $    984        $ --         $ 1,193         $    30    $  2,808
   After one year:
   More than one year to three years      191           97          --           2,296           1,050       3,634
   More than three years to five years  1,187           66          --           8,133           5,355      14,741
   More than five years to 10 years     8,915        2,499         389           4,308           5,835      21,946
   More than 10 years to 15 years      16,387        2,702          --           3,038           2,184      24,311
   More than 15 years...........       24,017        3,023          --           7,205           1,350      35,595
                                     --------     --------      ------         -------         -------    --------
      Total amount due..........      $51,298       $9,371        $389         $26,173         $15,804    $103,035
                                      =======       ======        ----         =======         =======    ========
</TABLE>

                                        5

<PAGE>



         Scheduled  contractual principal repayments of loans do not reflect the
actual life of the loans. The average life of a loan is substantially  less than
its contractual term because of prepayments. In addition, due-on-sale clauses on
loans generally give Lawrence Federal the right to declare loans immediately due
and payable if, among other  things,  the borrower  sells the real property with
the  mortgage and the loan is not repaid.  The average  life of a mortgage  loan
tends to  increase,  however,  when  current  mortgage  loan  market  rates  are
substantially  higher than rates on  existing  mortgage  loans and,  conversely,
tends to decrease when rates on existing mortgage loans are substantially higher
than current mortgage loan market rates.

         The following table sets forth, at December 31, 2000, the dollar amount
of loans  contractually due after December 31, 2001, and whether such loans have
fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
                                                                             Due After December 31, 2001
                                                                  -------------------------------------------------
                                                                      Fixed           Adjustable         Total
                                                                  --------------    --------------   --------------
                                                                                   (In thousands)
<S>                                                                   <C>               <C>              <C>
Real estate loans:
   One- to four-family.......................................         $37,116           $13,581          $50,697
   Multi-family and commercial...............................           7,124             1,263            8,387
   Other.....................................................             389                --              389
                                                                      -------           -------          -------
      Total real estate loans................................          44,629            14,844           59,473
Consumer loans...............................................          22,002             2,978           24,980
Mobile home loans............................................          14,722             1,052           15,774
                                                                      -------           -------         --------
      Total loans............................................         $81,353           $18,874         $100,227
                                                                      =======           =======         ========
</TABLE>

         One- to  Four-Family  Real Estate  Loans.  Lawrence  Federal's  primary
lending  activity is the  origination  of loans  secured by one- to  four-family
residences  located  in  its  market  area.  Lawrence  Federal  offers  one-year
adjustable-rate  mortgage loans and  fixed-rate  mortgage  loans.  Historically,
Lawrence  Federal has found that  borrowers in its market area have a preference
for fixed-rate  mortgage loans. At December 31, 2000, 73% of Lawrence  Federal's
residential  mortgage  loans had  fixed  interest  rates and 27% had  adjustable
interest rates.

         Lawrence  Federal  offers  fixed-rate  loans with terms up to 30 years,
although  most  loans  have  terms  of 20  years  or  less.  Lawrence  Federal's
adjustable-rate  mortgage  loans are  based on an  amortization  schedule  of 30
years.  The loan fees charged,  interest rates and other  provisions of Lawrence
Federal's  mortgage loans are determined by Lawrence Federal on the basis of its
own pricing  criteria  and market  conditions.  Interest  rates and  payments on
Lawrence Federal's adjustable-rate mortgage loans are adjusted annually based on
the Federal Housing Finance Board's national average mortgage  contract rate for
major lenders on the purchase of previously  occupied homes.  The maximum amount
by which the interest  rate may be increased or decreased on Lawrence  Federal's
adjustable-rate  mortgage  loans  is  generally  1% per  year  and the  lifetime
interest  rate cap is generally 5% over the initial  interest  rate of the loan.
Lawrence Federal qualifies the borrower based on the borrower's ability to repay
the loan based on the current index rate plus the  applicable  margin.  Lawrence
Federal's  adjustable-rate mortgage loans typically include a prepayment penalty
if the loan is paid off within  three  years.  The terms and  conditions  of the
adjustable-rate mortgage loans offered by Lawrence Federal,  including the index
for interest rates, may vary from time to time.

         Lawrence  Federal  occasionally  makes  loans  to  individuals  for the
construction  of their  principal  residence.  These  loans  are  structured  as
permanent mortgage loans. Upon the closing of the loan, the


                                        6

<PAGE>



proceeds are disbursed  into an escrow  account at Lawrence  Federal.  Funds are
disbursed  from  the  escrow  as the  house  is built  following  review  of the
construction project by an independent inspector.

         Adjustable-rate  mortgage loans help reduce Lawrence Federal's exposure
to changes in interest rates.  There are, however,  unquantifiable  credit risks
resulting from the potential of increased  costs due to changed rates to be paid
by the borrower. During periods of rising interest rates, the risk of default on
adjustable-rate  mortgage  loans may increase as a result of  repricing  and the
increased   payments   required  by  the   borrower.   In   addition,   although
adjustable-rate  mortgage  loans help make  Lawrence  Federal's  asset base more
responsive to changes in interest rates, the extent of this interest sensitivity
is limited by the annual and lifetime interest rate adjustment  limits.  Because
of these  considerations,  yields on  adjustable-rate  mortgage loans may not be
sufficient  to offset  increases  in  Lawrence  Federal's  cost of funds  during
periods of rising interest rates.

         Most loans  originated  by Lawrence  Federal  conform to Fannie Mae and
Freddie Mac underwriting  standards,  although Lawrence Federal has not sold any
loans in recent years.  Lawrence Federal's  residential mortgage loans typically
do not exceed 80% of the  appraised  value of the  property.  Although  Lawrence
Federal's  lending  policies  permit  Lawrence  Federal to lend up to 97% of the
appraised value of the property,  Lawrence Federal generally does not make loans
where the loan-to-value  ratio is over 90%. When the loan-to-value ratio exceeds
80%,  Lawrence  Federal  usually  imposes a higher  interest  rate, but does not
require private  mortgage  insurance.  Lawrence  Federal requires all properties
securing  its  mortgage  loans  to  be  appraised  by  an  approved  independent
state-certified  appraiser.  Lawrence Federal  generally  requires an acceptable
attorney's  opinion on the status of its lien on all loans  where real estate is
the primary  collateral.  Lawrence  Federal also requires  that fire,  casualty,
hazard  insurance  and, if  appropriate,  flood  insurance be maintained on most
properties securing real estate loans made by Lawrence Federal.

         Multi-family  and  Commercial  Real  Estate  Loans.   Lawrence  Federal
originates  both fixed- and  adjustable-rate  mortgage loans for the acquisition
and  refinancing of  multi-family  and  commercial  real estate  properties.  In
addition,  Lawrence Federal occasionally  participates in commercial real estate
loans with other financial  institutions  in its market area.  Nearly all of the
properties  securing Lawrence Federal's  multi-family and commercial real estate
loans are located in Lawrence Federal's market area.

         Most  of the  multi-family  loans  and  commercial  real  estate  loans
originated  by Lawrence  Federal are fully  amortizing  loans with a term of ten
years.  Generally,  the  maximum  loan-to-value  ratio  for  a  multi-family  or
commercial real estate loan is 70%. Lawrence Federal requires written appraisals
prepared  by an  approved  independent  appraiser  of  all  properties  securing
multi-family or commercial real estate loans.

         At December 31, 2000,  Lawrence Federal's  commercial real estate loans
were  secured  by a variety of  properties,  including  retail and small  office
properties,  hotels and  churches.  At December  31,  2000,  Lawrence  Federal's
largest commercial real estate loan had an outstanding balance of $504,000.  The
loan is secured by a hotel,  furnishings,  equipment and personal guarantees. At
December 31, 2000, this loan was performing according to its original terms.

         Multi-family  and  commercial  real  estate  lending  affords  Lawrence
Federal an opportunity to receive  interest at rates higher than those generally
available from one- to four-family  residential lending.  However, loans secured
by these  properties  usually  are greater in amount and are more  difficult  to
evaluate and monitor and, therefore,  involve a greater degree of risk than one-
to four-family  residential mortgage loans. Because payments on loans secured by
income producing  properties are often dependent on the successful operation and
management  of the  properties,  repayment  of these  loans may be  affected  by
adverse conditions in the


                                        7

<PAGE>



real estate  market or the economy.  Lawrence  Federal  seeks to minimize  these
risks  by  generally  limiting  the  maximum  loan-to-value  ratio  to  70%  for
multi-family  and commercial real estate loans and by strictly  scrutinizing the
financial condition of the borrower,  the cash flow of the project,  the quality
of the collateral and the management of the property securing the loan. Lawrence
Federal also attempts to minimize  credit risk by lending almost solely on local
properties  to  businesses  with which  Lawrence  Federal is familiar.  Lawrence
Federal also generally obtains personal loan guarantees from financially capable
parties.

         Other Real Estate  Loans.  Lawrence  Federal's  other real estate loans
consist  primarily of loans secured by unimproved  land.  These loans  generally
have a  term  of  ten  years  or  less.  Lawrence  Federal  limits  the  maximum
loan-to-value ratio for land loans to 70%.

         Mobile Home Loans.  Since 1976,  Lawrence Federal has originated mobile
home loans through Lanco  Services,  Inc., a company that  specializes in mobile
home lending.  Lawrence Federal's mobile home loans, which are made to borrowers
in Kentucky, Ohio and Indiana, have terms ranging from five to 20 years and have
either fixed or  adjustable  interest  rates.  At December  31,  2000,  Lawrence
Federal had 729 mobile homes loans, the average size of which was $20,900.

         Lanco Services  assembles the required loan documents and provides them
to Lawrence  Federal for review.  Lawrence Federal has the opportunity to accept
or reject each loan.  Lawrence Federal generally will finance up to a maximum of
95% of the purchase price of new mobile home units and up to a maximum of 80% of
the market value of used mobile home units.  Lawrence  Federal requires that the
borrower surrender the title to the mobile home unit during the term of the loan
and also requires homeowner's insurance on the unit at least equal to the amount
financed.

         Lawrence  Federal has an  arrangement  with Lanco  Services under which
Lanco Services handles all delinquencies  and defaults at its expense.  Lawrence
Federal  pays Lanco  Services a  percentage  of each loan, a portion of which is
placed in a deposit account at Lawrence Federal. This deposit account is used to
fund losses related to repossessions of mobile home units and to fund the return
of  origination  fees in the  event of  prepayment  of  mobile  home  loans.  In
addition,  in many instances,  Lawrence  Federal has recourse to the mobile home
dealer if the borrower defaults during a specified period ranging from 12 months
to the term of loan.

         Mobile home lending  generally  entails  greater risk than  traditional
residential mortgage lending.  Loans secured by mobile homes involve more credit
risk than mortgage loans because of the type and nature of the collateral, which
depreciates  over time,  and because  mobile home  borrowers  tend to have lower
incomes than Lawrence Federal's  residential mortgage borrowers.  In many cases,
any repossessed  collateral for a defaulted mobile home loan will not provide an
adequate  source  of  repayment  of the  outstanding  loan  balance  because  of
depreciation  or improper  repair and  maintenance of the  underlying  security.
Lawrence Federal's arrangement with Lanco Services  substantially  mitigates the
risks normally associated with mobile home lending. However, if Lawrence Federal
were to stop  originating  mobile home loans,  it would stop funding the deposit
account  through which losses have been absorbed.  Once that deposit  account is
exhausted, all future losses would have to be charged against Lawrence Federal's
allowance  for loan losses.  This may require  Lawrence  Federal to increase its
allowance  for loan  losses.  Furthermore,  Lawrence  Federal is  currently  not
equipped to service  its mobile home loan  portfolio  should  Lanco  Services be
unable to do so. If Lanco  Services  ceases  doing  business or  terminates  its
arrangement  with Lawrence  Federal,  Lawrence Federal would likely need to hire
additional staff in order to service the mobile home loan portfolio.



                                        8

<PAGE>



         Consumer  Loans.  Lawrence  Federal offers a variety of consumer loans,
including  automobile  loans,  other  secured  loans,  home equity credit lines,
second mortgage loans, credit cards and unsecured personal loans.

         Lawrence Federal offers fixed-rate automobile loans with terms of up to
72 months. Loan-to-value ratios and maximum loan terms vary depending on the age
of the vehicle. In April 2000, Lawrence Federal commenced an indirect automobile
lending  program,  which is managed by an  experienced  consumer  loan  officer.
Lawrence Federal originates automobile loans through approximately 17 automobile
dealers in southern Ohio, western West Virginia and northeastern Kentucky. These
dealers provide Lawrence  Federal  applications to finance new and used vehicles
sold by their  dealerships.  Lawrence  Federal has the  opportunity to accept or
reject each loan.  Generally,  Lawrence  Federal does not make automobile  loans
that  would  be  considered  "sub-prime."  Lawrence  Federal  pays  a fee to the
automobile  dealer based on the interest  rate on the loan.  This fee, or dealer
reserve, is deposited into an account at Lawrence Federal and paid to the dealer
monthly.  If a loan is paid off or charged off within a specified  time  period,
Lawrence Federal is credited with a portion of the dealer reserve,  which it may
withhold  from the dealer's  account or credit  against  future  payments to the
dealer.  Lawrence  Federal  anticipates  that it  will be able to  significantly
increase the size of its automobile loan portfolio  through its indirect lending
program.  At December 31, 2000,  Lawrence Federal held $13.8 million of indirect
auto loans.

         Lawrence  Federal  also  originates  consumer  loans  secured by boats,
motorcycles,  campers, motor homes and other recreational vehicles.  These loans
have fixed interest  rates and terms of up to five years.  At December 31, 2000,
Lawrence Federal had $8.7 million of such loans.

         Lawrence Federal offers home equity lines of credit and second mortgage
loans.  At December 31, 2000,  these loans totaled  $525,000.  The  underwriting
standards  applicable  to  these  loans  generally  are the  same as for one- to
four-family first mortgage loans, except that the combined  loan-to-value ratio,
including the balance of the first mortgage,  cannot exceed 90% of the appraised
value of the property.

         Lawrence Federal offers proprietary credit cards. At December 31, 2000,
Lawrence  Federal had  approximately  1,456  credit card  accounts  with a total
balance of $962,000.  The card program  generally  provides an individual credit
limit of $5,000 or less, however some credit limits may be higher, and currently
provides for a fixed interest rate of 13.80%. The terms of this program may vary
from time to time.

         Lawrence  Federal makes unsecured  personal loans in amounts  generally
not in excess of $10,000. Lawrence Federal also provides overdraft protection on
checking accounts. At December 31, 2000, unsecured loans totaled $1.9 million.

         Lawrence  Federal  believes that it will benefit from the higher yields
earned on consumer  loans and that the shorter  duration of consumer  loans will
improve Lawrence Federal's interest rate risk position.  However, consumer loans
entail greater risk than do residential mortgage loans, particularly in the case
of loans that are  unsecured or secured by rapidly  depreciating  assets such as
automobiles. In these cases, any repossessed collateral for a defaulted consumer
loan may not provide an adequate  source of  repayment of the  outstanding  loan
balance as a result of the greater  likelihood of damage,  loss or depreciation.
The remaining  deficiency often does not warrant further substantial  collection
efforts  against  the  borrower  beyond  obtaining  a  deficiency  judgment.  In
addition,  consumer loan collections are dependent on the borrower's  continuing
financial  stability,  and thus are more likely to be adversely  affected by job
loss,


                                        9

<PAGE>



divorce,  illness or personal bankruptcy.  Lawrence Federal expects that it will
increase its allowance for loan losses as its consumer loan  portfolio  grows by
charging a provision for loan losses against income.

         Loans to One Borrower.  The maximum  amount that  Lawrence  Federal may
lend to one borrower is limited by  regulation.  At December 31, 2000,  Lawrence
Federal's  regulatory  limit on loans to one borrower was $2.1 million.  At that
date, Lawrence Federal's largest amount of loans to one borrower,  including the
borrower's  related  interests,  was approximately $1.0 million and consisted of
commercial  and  residential  real estate  loans.  These  loans were  performing
according to their original terms at December 31, 2000.

         Loan Approval  Procedures and  Authority.  Lawrence  Federal's  lending
activities follow written,  non-discriminatory,  underwriting standards and loan
origination  procedures established by Lawrence Federal's Board of Directors and
management.  Generally,  all mortgage  loans require prior  approval of Lawrence
Federal's  Board of  Directors.  Various  bank  personnel  have  been  delegated
authority to approve mobile home loans and consumer loans,  including automobile
loans.  Two employees may combine their authority to jointly approve a loan that
exceeds their individual lending authority.

         Loan  Originations,  Purchases and Sales.  Lawrence  Federal's  lending
activities are conducted by its employees  operating through Lawrence  Federal's
offices.  Except in  connection  with its mobile  home and  indirect  automobile
lending,  Lawrence  Federal relies on  advertising,  referrals from realtors and
customers,  and personal  contact by Lawrence  Federal's  staff to generate loan
originations.  Lawrence  Federal  does  not use  loan  correspondents  or  other
third-parties  to  originate  loans.  Lawrence  Federal  occasionally  purchases
participation  interests in commercial  mortgage  loans through other  financial
institutions  in its market area. In the past,  Lawrence  Federal  generally has
retained for its portfolio all of the loans that it  originated.  Going forward,
Lawrence Federal intends to sell  substantially  all of the fixed-rate  mortgage
loans it originates. Lawrence Federal's ability to originate adjustable-rate and
fixed-rate loans is dependent upon the relative  customer demand for such loans,
which is affected by the current and expected future level of interest rates. As
a result of the low interest rate environment in recent years,  Lawrence Federal
has experienced strong loan demand as customers have preferred fixed-rate, fully
amortized loans.


                                       10

<PAGE>



         The following table presents  activity in the loan portfolio during the
periods indicated.

                                                          Year Ended
                                                         December 31,
                                                    ----------------------
                                                       2000        1999
                                                    ----------  ----------
                                                         (In thousands)
Loans at beginning of period........................ $  77,472     $69,410
   Originations:
     Real estate loans:
       One- to four-family..........................    15,594      15,446
       Multi-family and commercial..................       217          75
       Other........................................        --          25
                                                     ---------     -------
           Total real estate loans..................    15,811      15,546
     Consumer:
        Automobile..................................    18,219       1,962
        Other.......................................    11,915       7,677
     Mobile home....................................     7,093       4,016
                                                     ---------     -------
                  Total loans originated............    53,038      29,201

Participation loans purchased.......................        --          --
Deduct:
      Principal loan repayments
       and prepayments..............................    27,475      21,139
      Loan sales....................................        --          --
      Transfers to REO..............................        --          --
                                                     ---------     -------
            Sub-total...............................    27,475      21,139
                                                     ---------    --------
Net loan activity...................................    25,563       8,062
                                                     ---------    --------
      Loans at end of period .......................  $103,035     $77,472
                                                     =========    ========


         Loan  Commitments.  Lawrence  Federal  issues loan  commitments  to its
prospective   borrowers   conditioned  on  the  occurrence  of  certain  events.
Commitments  are made in  writing  on  specified  terms and  conditions  and are
honored for up to 90 days from approval.  At December 31, 2000, Lawrence Federal
had loan commitments totaling $4.4 million. See note 8 of the notes to financial
statements included in this Form 10-KSB.

         Loan Fees. In addition to interest  earned on loans,  Lawrence  Federal
receives   income  from  fees  in  connection  with  loan   originations,   loan
modifications,  late  payments  and for  miscellaneous  services  related to its
loans.  Income from these activities varies from period to period depending upon
the volume and type of loans made and competitive conditions.

         Lawrence Federal charges loan origination fees, which are calculated as
a percentage of the amount borrowed, subject to a minimum amount. As required by
applicable  accounting  principles,  loan origination fees,  discount points and
certain loan origination  costs are deferred and recognized over the contractual
remaining  lives of the related  loans on a level yield  basis.  At December 31,
2000, Lawrence Federal had $3.1 million of net deferred loan costs.


                                       11

<PAGE>



         Nonperforming  Assets and  Delinquencies.  All loan payments are due on
the first day of each month.  When a borrower  on a  residential  mortgage  loan
fails to make a required loan  payment,  Lawrence  Federal  attempts to cure the
deficiency by contacting the borrower and seeking the payment.  A late notice is
mailed  after 15 days of  delinquency.  In most  cases,  deficiencies  are cured
promptly.  Additional notices are mailed after 30 and 60 days of delinquency and
Lawrence Federal attempts to contact the borrower by either telephone, letter or
in person in order to determine the cause of the  delinquency and to arrange for
curing the default.  In most cases, after the 90th day of delinquency,  Lawrence
Federal  commences  foreclosure  proceedings  under  the  terms of the  security
instrument and applicable law.

         When a  borrower  on a  consumer  loan  fails to make a  required  loan
payment,  a late  notice is mailed  after 10 days of  delinquency  and  Lawrence
Federal follows up with a letter and a phone call to the borrower.  Depending on
the type of  collateral,  Lawrence  Federal  may take  action to  repossess  the
property  securing  the loan.  Delinquent  mobile  home loans are handled by the
company through which Lawrence Federal originates the loans.

         Management  informs  the Board of  Directors  monthly  of the amount of
loans delinquent more than 30 days, all loans in foreclosure, and all foreclosed
and repossessed property that Lawrence Federal owns.

         Lawrence  Federal ceases  accruing  interest on loans when principal or
interest  payments are  delinquent 90 days or more unless the loan is adequately
collateralized and in the process of collection. Once the accrual of interest on
a loan is  discontinued,  all interest  previously  accrued is reversed  against
current  period  interest  income once  management  determines  that interest is
uncollectible.


                                       12

<PAGE>



         The  following  table  presents  information  with  respect to Lawrence
Federal's nonperforming assets at the dates indicated.

                                                             At December  31,
                                                         -----------------------
                                                            2000          1999
                                                         ---------      --------
                                                          (Dollars in thousands)
Accruing loans past due 90 days or more:
   One- to four-family real estate....................... $  25         $  45
   Multi-family and commercial real estate...............    --            --
   Other real estate.....................................    --            --
   Automobile............................................    --             5
   Other consumer .......................................    45            27
   Mobile home ..........................................   263           209
                                                          -----         -----
         Total...........................................   333           286
Nonaccruing loans:
   One- to four-family real estate.......................    84            --
   Multi-family and commercial real estate...............    --            --
   Other real estate.....................................    --            --
   Automobile............................................    --            --
   Other consumer........................................    --            --
   Mobile home...........................................    --            --
                                                          -----         -----
         Total...........................................    84            --
Real estate owned (REO)..................................    --            --
Other repossessed assets.................................   253           342
                                                          -----         -----
         Total nonperforming assets......................   670           628
Troubled debt restructurings.............................    --            --
                                                          -----         -----
Troubled debt restructurings and
   total nonperforming assets............................  $670          $628
                                                           ====          ====
Total nonperforming loans and
   troubled debt restructurings as a
   percentage of total loans.............................  0.40%         0.37%
Total nonperforming assets and
   troubled debt restructurings as a
   percentage of total assets............................  0.54%         0.61%


         Interest  income  that would  have been  recorded  for the years  ended
December 31, 2000 and 1999 had nonaccruing loans been current according to their
original terms amounted to  approximately  $2,700 and $3,000,  respectively.  No
interest  related to these loans was  included in interest  income for the years
ended December 31, 2000 or 1999.


                                       13

<PAGE>


         The following table sets forth the delinquencies in Lawrence  Federal's
loan portfolio as of the dates indicated.
<TABLE>
<CAPTION>

                                        At December 31, 2000                        At December 31, 1999
                              ----------------------------------------   ----------------------------------------
                                   30-89 Days        90 Days or More         30-89 Days        90 Days or More
                              -------------------- -------------------   ------------------- --------------------
                                Number   Principal  Number   Principal    Number   Principal   Number   Principal
                                  of      Balance     of      Balance       of      Balance      of      Balance
                                Loans    of Loans    Loans   of Loans      Loans   of Loans    Loans    of Loans
                              ---------- --------- --------- ---------   --------- --------- ---------- ---------
                                                            (Dollars in thousands)
<S>                                  <C>  <C>            <C>    <C>            <C>  <C>            <C>    <C>
Real estate loans:
   One- to four-family.......        8    $  342         3      $109           6    $  245         2      $  45
   Multi-family and
      commercial.............        -         -         -         -           -         -         -          -
   Other.....................        -         -         -         -           -         -         -          -
Consumer loans:
   Automobile................       20       161         -         -           7        50         2          5
   Other.....................       76       380        13        45          57       138        12         27
Mobile home loans............       80     1,659        29       263          48       867        32        209
                                   ---    ------        --      ----         ---    ------        --       ----
      Total..................      184    $2,542        45      $417         118    $1,300        48       $286
                                   ===    ======        ==      ====         ===    ======        ==       ====
Delinquent loans to
   total gross loans.........               2.47%               0.40%                 1.68%                0.37%
</TABLE>

         Real Estate Owned. Real estate acquired by Lawrence Federal as a result
of  foreclosure or by  deed-in-lieu  of foreclosure is classified as real estate
owned until sold.  When  property is acquired it is recorded at the lower of its
cost, which is the unpaid principal balance of the loan plus foreclosure  costs,
or fair market value at the date of foreclosure,  establishing a new cost basis.
Holding  costs and  declines in fair value  after  acquisition  of the  property
result in charges against income. At December 31, 2000,  Lawrence Federal had no
real estate owned.

         Asset  Classification.  Federal banking regulators have adopted various
regulations  and practices  regarding  problem  assets of savings  institutions.
Under such  regulations,  examiners  have  authority to identify  problem assets
during examinations and, if appropriate, require them to be classified.

         There  are  three  classifications  for  problem  assets:  substandard,
doubtful and loss.  Substandard  assets have one or more defined  weaknesses and
are characterized by the distinct  possibility that the insured institution will
sustain some loss if the  deficiencies  are not corrected.  Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that, on
the basis of currently  existing  facts,  conditions and values,  the weaknesses
make  collection  or  liquidation  in full  questionable,  and  there  is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little  value that  continuance  as an asset of the  institution  is not
warranted.  If an asset or portion  thereof is classified  as loss,  the insured
institution  establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss  allowances   established  to  cover  probable  losses  related  to  assets
classified   substandard   or  doubtful  can  be  included  in   determining  an
institution's  regulatory capital,  while specific valuation allowances for loan
losses  generally  do not  qualify as  regulatory  capital.  Assets  that do not
currently  expose  the  insured   institution  to  sufficient  risk  to  warrant
classification in one of the  aforementioned  categories but possess  weaknesses
are designated  "special  mention."  Lawrence Federal monitors "special mention"
assets.


                                       14

<PAGE>


         The following  table presents  classified and special mention assets at
December 31, 2000.

<TABLE>
<CAPTION>
                                           Loss             Doubtful            Substandard        Special Mention
                                   -------------------  ------------------   ------------------  --------------------
                                                Number              Number               Number                Number
                                   Principal      of    Principal    of      Principal    of      Principal      of
                                    Balance     Loans    Balance    Loans     Balance    Loans     Balance     Loans
                                    -------     -----    -------    -----     -------    -----     -------     -----
                                                                    (Dollars in thousands)
<S>                                 <C>        <C>       <C>        <C>        <C>       <C>       <C>        <C>
Real estate loans:
   One- to four-family ........     $  --         --       $ --         --       $109          3    $   --       --
   Multi-family and
    commercial ................        --         --         --         --         --         --        --       --
   Other ......................        --         --         --         --         --         --        --       --
Consumer loans:
   Automobile .................        --         --         --         --         --         --        --       --
   Other ......................        --         --         10          9         35          4        --       --
Mobile home loans .............        --         --         --         --        516         41        --       --
                                    -----                  ----       ----       ----       ----      ----
      Total ...................    $   --         --       $ 10          9       $660         48    $   --       --
                                    =====                  ====       ====       ====       ====      ====
</TABLE>


         Allowance  for Loan Losses.  In  originating  loans,  Lawrence  Federal
recognizes  that losses will be  experienced  on loans and that the risk of loss
will  vary  with,  among  other  things,  the  type  of  loan  being  made,  the
creditworthiness  of the borrower  over the term of the loan,  general  economic
conditions  and, in the case of a secured loan,  the quality of the security for
the loan.  Lawrence  Federal  maintains an  allowance  for loan losses to absorb
losses probable in the loan portfolio.  The allowance for loan losses represents
management's  estimate of probable  losses based on information  available as of
the date of the financial statements.  The allowance for loan losses is based on
management's  evaluation of the collectibility of the loan portfolio,  including
past loan loss  experience,  probable and estimable  losses,  information  about
specific  borrower   situations  and  estimated   collateral  values,   economic
conditions and other factors.

         The loan portfolio and other credit exposures are regularly reviewed by
management  to evaluate  the  adequacy of the  allowance  for loan  losses.  The
methodology  for  assessing  the   appropriateness  of  the  allowance  includes
comparison to actual losses, peer group comparisons,  industry data and economic
conditions.  In addition,  the regulatory agencies, as an integral part of their
examination  process,  periodically review Lawrence Federal's allowance for loan
losses. Such agencies may require Lawrence Federal to make additional provisions
for estimated losses based upon judgments different from those of management.

         In connection with assessing the allowance, loss factors are applied to
various  pools  of  outstanding  loans.  Lawrence  Federal  segregates  the loan
portfolio according to risk characteristics  (i.e.,  mortgage loans,  consumer).
Loss factors are derived using Lawrence Federal's historical loss experience and
may be adjusted for significant factors that, in management's  judgment,  affect
the collectibility of the portfolio as of the evaluation date.

         In addition,  management  assesses  the  allowance  using  factors that
cannot be associated  with  specific  credit or loan  categories.  These factors
include  management's  subjective  evaluation of local and national economic and
business  conditions,  portfolio  concentration and changes in the character and
size of the loan  portfolio.  The allowance  methodology  reflects  management's
objective  that the overall  allowance  appropriately  reflects a margin for the
imprecision necessarily inherent in estimates of expected credit losses.

         At December  31, 2000,  Lawrence  Federal's  allowance  for loan losses
represented 0.75% of total gross loans and 116% of nonperforming loans. Although
management believes that it uses the best information available to establish the
allowance for loan losses, future adjustments to the allowance for loan


                                       15

<PAGE>


losses may be necessary and results of operations could be adversely affected if
circumstances  differ  substantially  from the  assumptions  used in making  the
determinations.  Furthermore, while Lawrence Federal believes it has established
its existing  allowance for loan losses in conformity  with  generally  accepted
accounting principles,  there can be no assurance that regulators,  in reviewing
Lawrence Federal's loan portfolio, will not request Lawrence Federal to increase
its  allowance for loan losses.  In addition,  because  future events  affecting
borrowers and  collateral  cannot be predicted with  certainty,  there can be no
assurance  that the  existing  allowance  for loan  losses is  adequate  or that
increases will not be necessary should the quality of any loans deteriorate as a
result of the factors  discussed above.  Any material  increase in the allowance
for loan losses may adversely affect Lawrence Federal's  financial condition and
results of operations.

         The  following  table  presents  an  analysis  of  Lawrence   Federal's
allowance for loan losses.


                                                        Year Ended December 31,
                                                        -----------------------
                                                         2000            1999
                                                         ----            ----
                                                         (Dollars in Thousands)
Allowance for loan losses,
 beginning of year .............................         $ 589           $ 536
Charged-off loans:
   Real estate .................................            --              --
   Consumer ....................................          (119)           (137)
   Mobile home .................................            --              --
                                                         -----           -----
      Total charged-off loans ..................          (119)           (137)
Recoveries on loans previously
 charged off:
   Real estate .................................            --              --
   Consumer ....................................            10              70
   Mobile home .................................            --              --
                                                         -----           -----
      Total recoveries .........................            10              70
                                                         -----           -----
Net loans charged-off ..........................          (109)            (67)
Provision for loan losses ......................           295             120
                                                         -----           -----
Allowance for loan losses, end
 of period .....................................         $ 775           $ 589
                                                         =====           =====
Net loans charged-off to average
 interest-earning loans ........................          0.12%           0.09%
Allowance for loan losses to
 total loans ...................................          0.75%           0.76%
Allowance for loan losses to
 nonperforming loans and troubled
 debt restructuring ............................        116.00%          94.00%





                                       16

<PAGE>


         The  following  table  presents  the  approximate   allocation  of  the
allowance  for loan losses by loan category at the dates  indicated.  Management
believes that the allowance can be allocated by category only on an  approximate
basis.  The  allocation of the  allowance to each category is not  indicative of
future  losses and does not restrict  the use of any of the  allowance to absorb
losses in any category.

<TABLE>
<CAPTION>

                                                    At December 31,
                       -------------------------------------------------------------------------
                                    2000                                    1999
                       --------------------------------        ---------------------------------
                                 Percent of    Percent                    Percent of    Percent
                                 Allowance     of Loans                   Allowance     of Loans
                                  in Each      in Each                     in Each      in Each
                                  Category     Category                    Category     Category
                                  to Total     to Total                    to Total     to Total
                       Amount    Allowance      Loans          Amount     Allowance      Loans
                       ------    ---------     --------        ------     ---------     --------
                                               (Dollars in thousands)
<S>                        <C>      <C>         <C>              <C>      <C>              <C>
Real estate........        $351     45.3%       57.4%            $155      26.3%           74.9%
Consumer...........         175     22.6        25.5              176      30.0             9.9
Mobile home........         208     26.8        17.1              208      35.3            15.2
Unallocated........          41      5.3         N/A               50       8.4             N/A
                         ------    -----                       ------      ----
   Total allowance
    for loan losses        $775    100.0%                        $589     100.0%
                           ====    =====                         ====     =====
</TABLE>


Investment Activities

         Under federal law,  Lawrence Federal has authority to invest in various
types of liquid assets,  including U.S.  Government  obligations,  securities of
various federal agencies and of state and municipal governments, deposits at the
Federal Home Loan Bank of Cincinnati  and  certificates  of deposit of federally
insured  institutions.  Within certain regulatory  limits,  Lawrence Federal may
also  invest  a  portion  of  its  assets  in  corporate  securities,  including
non-mortgage,  asset-backed  instruments.  Savings  institutions  like  Lawrence
Federal are also required to maintain an investment in Federal Home Loan Bank of
Cincinnati  stock.  Lawrence  Federal is required  under federal  regulations to
maintain a minimum amount of liquid assets.

         Lawrence  Federal's  Investment   Committee,   which  consists  of  the
President  and  two  members  of  the  Board  of  Directors,   has  the  overall
responsibility  for  Lawrence  Federal's  investment  portfolio.  The  Board  of
Directors also receives a monthly portfolio report. Lawrence Federal's President
is authorized to make investment  decisions  consistent with Lawrence  Federal's
investment  policy and the  recommendations  of  Lawrence  Federal's  Investment
Committee and is primarily responsible for daily investment activities.

         The primary objectives of Lawrence Federal's  investment  portfolio are
to provide a source of liquidity  sufficient  to meet  regulatory  and operating
requirements,  provide an  alternative  source of income  through  interest  and
dividends,  improve Lawrence  Federal's  interest rate risk position,  diversify
Lawrence  Federal's  assets and  provide  collateral  for  pledging.  Investment
decisions are made in accordance with Lawrence  Federal's  investment policy and
are based upon the quality of a particular  investment,  its inherent risks, the
composition  of the  balance  sheet,  market  expectations,  Lawrence  Federal's
liquidity,  income  and  collateral  needs and how the  investment  fits  within
Lawrence Federal's interest rate risk strategy.

         The investment  portfolio  consists primarily of debt issues. It is the
current  practice  of  Lawrence  Federal  to  invest  in  debt  securities  with
maturities  of five years or less issued only by the United  States  Treasury or
United States government  agencies.  The other securities in Lawrence  Federal's
investment  portfolio  consist  of  trust  preferred  securities.   All  of  the
securities in the portfolio carry market risk, insofar


                                       17

<PAGE>



as increases in market  interest rates may cause a decrease in market value.  In
addition,  trust preferred  securities carry credit risk, insofar as the payment
of dividends depends on the successful operation of the companies that sponsored
them. All of the trust preferred  securities  purchased by Lawrence Federal have
received one of the two highest ratings by a nationally recognized rating agency
such as Standard & Poor's or Moody's.

         Generally  accepted  accounting  principles  require that securities be
categorized   as   either    "held-to-maturity,"    "trading    securities"   or
"available-for-sale,"   based  on   management's   intent  as  to  the  ultimate
disposition   of  each   security.   Debt   securities   may  be  classified  as
"held-to-maturity"  and reported in financial  statements at amortized cost only
if the  reporting  entity  has the  positive  intent  and  ability to hold those
securities to maturity.  Securities that might be sold in response to changes in
market interest rates,  changes in the security's  prepayment risk, increases in
loan   demand,    or   other   similar   factors   cannot   be   classified   as
"held-to-maturity."  Debt and  equity  securities  held for  current  resale are
classified as "trading securities." These securities are reported at fair value,
and unrealized gains and losses on the securities would be included in earnings.
Lawrence Federal does not currently use or maintain a trading account.  Debt and
equity  securities  not  classified  as either  "held-to-maturity"  or  "trading
securities"  are  classified  as  "available-for-sale."   These  securities  are
reported at fair value,  and  unrealized  gains and losses on the securities are
excluded  from  earnings  and  reported,  net of deferred  taxes,  as a separate
component of equity. Lawrence Federal currently classifies all of its securities
as available-for-sale.

         At December  31,  2000,  Lawrence  Federal did not own any  securities,
other than U.S.  Government  and agency  securities,  that had an aggregate book
value in excess of 10% of Lawrence Federal's retained earnings at that date.

         The  following  table  presents  the  amortized  cost and fair value of
Lawrence Federal's securities at the dates indicated.


                                                  At December 31,
                                    --------------------------------------------
                                           2000                    1999
                                    -------------------     --------------------
                                    Amortized      Fair     Amortized     Fair
                                       Cost        Value       Cost       Value
                                       ----        -----       ----       -----
                                                   (In thousands)
U.S. Treasury securities .......     $    --     $    --     $   682     $   669
Obligations of U.S.
 government agencies ...........       5,506       5,472      11,057      10,756
Other securities ...............       1,013         959       1,019         816
                                     -------     -------     -------     -------
    Total ......................     $ 6,519     $ 6,431     $12,758     $12,241
                                     =======     =======     =======     =======


                                       18

<PAGE>


         The following presents the activity in the securities portfolio for the
periods indicated.


                                                             Year Ended
                                                             December 31,
                                                       ------------------------
                                                         2000            1999
                                                         ----            ----
                                                            (In thousands)
Investment securities, beginning
 of period .....................................       $ 12,241        $ 12,763
Purchases:
   Investment securities-
    available-for-sale .........................          2,050           2,183
Sales:
   Investment securities-
    available-for-sale .........................         (8,119)         (1,123)
Calls and maturities:
   Investment securities-
    available-for-sale .........................             --          (1,002)
(Amortization) accretion of
 premium/discount ..............................            (13)            (23)
Increase (decrease) in unrealized
 appreciation/depreciation .....................            272            (557)
                                                       --------        --------
      Net increase (decrease) in
       investment securities ...................         (5,810)           (522)
                                                       --------        --------
Investment securities, end
 of period .....................................       $  6,431        $ 12,241
                                                       ========        ========



         The table below sets forth certain  information  regarding the carrying
value, weighted average yields and contractual  maturities of Lawrence Federal's
debt securities as of December 31, 2000.

<TABLE>
<CAPTION>
                                                                    At December 31, 2000
                             ------------------------------------------------------------------------------------------------------
                                                 More than One Year  More than Five Years
                              One Year or Less     to Five Years         to Ten Years    More than Ten Years           Total
                             ------------------  ------------------  ------------------  --------------------  --------------------
                                       Weighted            Weighted            Weighted             Weighted              Weighted
                             Carrying  Average  Carrying   Average   Carrying  Average   Carrying    Average   Carrying     Average
                               Value    Yield     Value     Yield      Value    Yield      Value      Yield      Value       Yield
                               -----    -----     -----     -----      -----    -----     -----       -----      -----       -----
                                                                   (Dollars in thousands)
<S>                           <C>      <C>       <C>        <C>       <C>      <C>       <C>         <C>       <C>          <C>
Obligations of U.S.
  government agencies ........ $  --    --%      $5,472       6.30%    $  --     --%      $  --         --%     $5,472       6.30%
Other securities .............    --    --           --         --        --     --         959       7.07         959       7.07
                               -----             ------                -----              -----                 ------
   Total debt securities
    at a fair value .......... $  --    --%      $5,472       6.30%    $  --     --%      $ 959       7.07%     $6,431       6.41%
                               =====             ======                =====              =====                 ======
</TABLE>


Deposit Activities and Other Sources of Funds

         General.  Deposits are the major external  source of funds for Lawrence
Federal's lending and other investment activities. In addition, Lawrence Federal
also generates funds  internally from loan principal  repayments and prepayments
and maturing  securities.  Scheduled  loan  repayments  are a relatively  stable
source of funds,  while deposit  inflows and outflows and loan  prepayments  are
influenced  significantly by general interest rates and money market conditions.
Lawrence  Federal  may  use  borrowings  from  the  Federal  Home  Loan  Bank of
Cincinnati to compensate for reductions in the  availability of funds from other
sources.  Presently,  Lawrence Federal has no other borrowing arrangements aside
from the Federal Home Loan Bank.  Until recent years,  Lawrence  Federal  relied
almost  exclusively on deposits and internally  generated funds as its source of
funds. In 1997,  Lawrence Federal began utilizing advances from the Federal Home
Loan Bank.  Lawrence  Federal  anticipates that it will continue to use borrowed
funds in the future, depending on market conditions and its need for funds.


                                       19

<PAGE>



         Deposit Accounts. Nearly all of Lawrence Federal's depositors reside in
Ohio,  Kentucky or West  Virginia.  Lawrence  Federal  offers a wide  variety of
deposit  accounts with a range of interest rates and terms.  Lawrence  Federal's
deposit  accounts  consist of a variety of savings  accounts,  checking  and NOW
accounts,  certificates  of deposit,  individual  retirement  accounts and money
market  accounts.  The maturities of Lawrence  Federal's  certificate of deposit
accounts range from 91 days to five years.  Deposit  account terms vary with the
principal  differences  being the  minimum  balance  deposit,  early  withdrawal
penalties,  limits on the number of transactions and the interest rate. Lawrence
Federal reviews its deposit mix and pricing weekly.

         Lawrence  Federal  believes it is  competitive in the interest rates it
offers on its deposit products. Lawrence Federal determines the rates paid based
on a number of factors, including rates paid by competitors,  Lawrence Federal's
need for funds  and cost of  funds,  borrowing  costs  and  movements  of market
interest rates. Lawrence Federal does not utilize brokers to obtain deposits and
at December 31, 2000 had no brokered deposits.

         The following table shows the composition of Lawrence Federal's deposit
accounts at the dates indicated.


                                                            At December 31
                                                       -------------------------
                                                         2000              1999
                                                         ----              ----
                                                             (In thousands)
Noninterest-bearing accounts .................         $  1,409         $  1,309
Passbook accounts ............................           19,568           17,835
Money market accounts ........................              897              790
NOW accounts .................................            9,142           10,257
Certificates of deposit ......................           72,091           60,108
                                                       --------         --------
     Total deposits ..........................         $103,107         $ 90,299
                                                       ========         ========


         The following table presents the deposit  activity of Lawrence  Federal
for the periods indicated:


                                                                Year Ended
                                                               December 31,
                                                          ----------------------
                                                            2000          1999
                                                            ----          ----
                                                              (In thousands)
Beginning balance ...................................     $ 90,299     $ 88,492
Increase (decrease) before interest credited ........        8,224       (2,215)
Interest credited ...................................        4,584        4,022
                                                          --------     --------
Net increase ........................................       12,920        1,807
                                                          --------     --------
      Ending balance ................................     $103,107     $ 90,299
                                                          ========     ========


                                       20

<PAGE>


         At  December  31,  2000,   Lawrence   Federal  had  $13.1   million  in
certificates of deposit with principal  balances of $100,000 or more maturing as
follows:


                                                              Weighted
   Maturity Period                            Amount        Average Rate
   ---------------                            ------        ------------
                                               (Dollars in thousands)
Three months or less ....................... $ 2,282            6.58%
Over 3 through 6 months ....................   1,966            6.59
Over 6 through 12 months ...................   4,586            6.66
Over 12 months .............................   4,308            5.35
                                             -------
         Total ............................. $13,142            6.20%
                                             =======


         Borrowings.  Lawrence  Federal has the ability to use advances from the
Federal Home Loan Bank of Cincinnati to supplement  its supply of lendable funds
and to meet  deposit  withdrawal  requirements.  The  Federal  Home Loan Bank of
Cincinnati  functions  as a central  reserve bank  providing  credit for savings
banks  and  certain  other  member  financial  institutions.  As a member of the
Federal  Home Loan Bank of  Cincinnati,  Lawrence  Federal  is  required  to own
capital stock in the Federal Home Loan Bank of  Cincinnati  and is authorized to
apply for  advances  on the  security  of the  capital  stock and certain of its
mortgage loans and other assets, principally securities that are obligations of,
or  guaranteed  by,  the  U.S.  Government  or its  agencies,  provided  certain
creditworthiness  standards  have  been met.  Advances  are made  under  several
different  credit  programs.  Each credit  program has its own interest rate and
range of  maturities.  Depending  on the program,  limitations  on the amount of
advances are based on the financial  condition of the member institution and the
adequacy of  collateral  pledged to secure the credit.  At  December  31,  2000,
Lawrence  Federal had  arranged  the ability to borrow a total of  approximately
$5.0 million from the Federal Home Loan Bank of Cincinnati.

         The following table presents  certain  information  regarding  Lawrence
Federal's borrowed funds at or for the periods ended on the dates indicated:


                                                         Year Ended December 31,
                                                         -----------------------
                                                           2000           1999
                                                           ----           ----
                                                          (Dollars in thousands)
FHLB advances:
   Average balance outstanding ...................       $ 5,172        $   633
   Maximum amount outstanding
    at any month-end during the period ...........        10,000          4,500
   Balance outstanding at end of period ..........         5,000          4,500
   Weighted average interest rate
    during the period ............................          6.69%          5.64%
   Weighted average interest rate
    at end of period .............................          6.87           5.64


Subsidiaries

         Lawrence Federal has one subsidiary,  Lawrence Financial Services Corp.
Federal  savings  associations  generally may invest up to 3% of their assets in
service corporations, provided that any amount in excess of 2% is used primarily
for community,  inner-city and community  development  projects. At December 31,
2000,  Lawrence  Federal's equity investment in its subsidiary was $187,000,  or
1.5% of total assets.  Lawrence Financial Services Corp. holds real property for
investment purposes.


                                       21

<PAGE>


Personnel

         As of December 31, 2000,  Lawrence  Federal had 41 full-time  employees
and three  part-time  employees,  none of whom is  represented  by a  collective
bargaining unit.  Lawrence Federal believes its relationship  with its employees
is good.


                           REGULATION AND SUPERVISION

General

         As a savings and loan holding company,  Lawrence  Financial is required
by federal law to file reports with,  and otherwise  comply with,  the rules and
regulations of the Office of Thrift Supervision.  Lawrence Federal is subject to
extensive  regulation,  examination  and  supervision  by the  Office  of Thrift
Supervision, as its primary federal regulator, and the Federal Deposit Insurance
Corporation, as the deposit insurer. Lawrence Federal is a member of the Federal
Home Loan Bank System and,  with  respect to deposit  insurance,  of the Savings
Association Insurance Fund managed by the Federal Deposit Insurance Corporation.
Lawrence Federal must file reports with the Office of Thrift Supervision and the
Federal Deposit  Insurance  Corporation  concerning its activities and financial
condition in addition to obtaining  regulatory  approvals prior to entering into
certain  transactions  such as mergers with, or  acquisitions  of, other savings
institutions.  The  Office of Thrift  Supervision  and/or  the  Federal  Deposit
Insurance  Corporation conduct periodic  examinations to test Lawrence Federal's
safety and soundness and compliance with various regulatory  requirements.  This
regulation and supervision  establishes a comprehensive  framework of activities
in which an institution can engage and is intended  primarily for the protection
of the insurance fund and  depositors.  The regulatory  structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement  activities and examination  policies,  including  policies with
respect to the  classification  of assets and the establishment of adequate loan
loss  reserves  for  regulatory   purposes.   Any  change  in  such   regulatory
requirements  and  policies,  whether by the Office of Thrift  Supervision,  the
Federal  Deposit  Insurance  Corporation  or the  U.S.  Congress,  could  have a
material  adverse  impact on  Lawrence  Financial,  Lawrence  Federal  and their
operations.  Certain  of the  regulatory  requirements  applicable  to  Lawrence
Federal and to Lawrence  Financial  are  referred to below or  elsewhere in this
report.  The description of statutory  provisions and regulations  applicable to
savings  institutions and their holding  companies  included in this report does
not purport to be a complete  description of such statutes and  regulations  and
their effects on Lawrence Federal and Lawrence Financial.  As a condition to the
approval of Lawrence Federal's conversion,  the Office of Thrift Supervision has
required  Lawrence  Federal to operate  under a charter that  subjects it to the
supervision of the Office of Thrift Supervision for a period of three years.

Holding Company Regulation

         Lawrence Financial is a nondiversified unitary savings and loan holding
company  within the meaning of federal law.  Under prior law, a unitary  savings
and  loan  holding  company,  such as  Lawrence  Financial,  was  not  generally
restricted  as to the  types of  business  activities  in  which it may  engage,
provided that Lawrence Federal  continued to be a qualified  thrift lender.  The
Gramm-Leach-Bliley  Act of 1999,  however,  restricts  unitary  savings and loan
holding  companies  not existing or applied for before May 4, 1999 to activities
permissible  for  financial  holding  companies  under  the law or for  multiple
savings and loan holding companies.  Lawrence Financial is not grandfathered and
is limited to the  activities  permissible  for financial  holding  companies or
multiple  savings and loan holding  companies.  A financial  holding company may
engage in  activities  that are  financial  in nature,  incidental  to financial
activities or complementary to a financial activity. A multiple savings and loan
holding company is generally limited to activities


                                       22

<PAGE>



permissible for bank holding companies under Section 4(c)(8) of the Bank Holding
Company Act, subject to the prior approval of the Office of Thrift  Supervision,
and certain  additional  activities  authorized by Office of Thrift  Supervision
regulation.

         A savings and loan  holding  company is  prohibited  from,  directly or
indirectly,  acquiring  more  than 5% of the  voting  stock of  another  savings
institution or savings and loan holding company  without prior written  approval
of the Office of Thrift Supervision and from acquiring or retaining control of a
depository  institution  that is not  insured by the Federal  Deposit  Insurance
Corporation.  In evaluating applications by holding companies to acquire savings
institutions,  the Office of Thrift  Supervision  considers  the  financial  and
managerial resources and future prospects of the holding company and institution
involved,  the effect of the  acquisition  on the risk to the deposit  insurance
funds, the convenience and needs of the community and competitive factors.

         The Office of Thrift  Supervision may not approve any acquisition  that
would result in a multiple savings and loan holding company  controlling savings
institutions in more than one state, subject to two exceptions: (1) the approval
of interstate supervisory acquisitions by savings and loan holding companies and
(2) the acquisition of a savings institution in another state if the laws of the
state of the target savings  institution  specifically permit such acquisitions.
The states vary in the extent to which they permit  interstate  savings and loan
holding company acquisitions.

         Although savings and loan holding companies are not subject to specific
capital  requirements  or specific  restrictions  on the payment of dividends or
other capital distributions,  federal regulations do prescribe such restrictions
on subsidiary  savings  institutions as described  below.  Lawrence Federal must
notify the Office of Thrift Supervision 30 days before declaring any dividend to
Lawrence  Financial.  In addition,  the financial impact of a holding company on
its subsidiary institution is a matter that is evaluated by the Office of Thrift
Supervision  and the agency has  authority to order  cessation of  activities or
divestiture of subsidiaries  deemed to pose a threat to the safety and soundness
of the institution.

Federal Savings Institution Regulation

         Business Activities. The activities of federal savings institutions are
governed by federal law and  regulations.  These laws and regulations  delineate
the  nature and  extent of the  activities  in which  federal  associations  may
engage. In particular, many types of lending authority for federal associations,
e.g.,  commercial,  non-residential  real property loans and consumer loans, are
limited to a specified percentage of the institution's capital or assets.

         Capital   Requirements.   The  Office  of  Thrift  Supervision  capital
regulations   require  savings   institutions  to  meet  three  minimum  capital
standards:  a  1.5%  tangible  capital  ratio,  a  4%  leverage  ratio  (3%  for
institutions receiving the highest rating on the CAMELS rating system) and an 8%
risk-based  capital ratio. In addition,  the prompt  corrective action standards
discussed  below also  establish,  in  effect,  a minimum  2%  tangible  capital
standard, a 4% leverage ratio (3% for institutions  receiving the highest rating
on the CAMELS  financial  institution  rating  system),  and,  together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
Office of Thrift  Supervision  regulations  also  require  that,  in meeting the
tangible, leverage and risk-based capital standards, institutions must generally
deduct  investments  in and  loans to  subsidiaries  engaged  in  activities  as
principal that are not permissible for a national bank.

         The risk-based capital standard for savings  institutions  requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and  supplementary  capital)  to  risk-weighted  assets  of at  least 4% and 8%,
respectively.  In determining the amount of  risk-weighted  assets,  all assets,
including certain


                                       23

<PAGE>



off-balance sheet assets,  are multiplied by a risk-weight factor of 0% to 100%,
assigned by the Office of Thrift  Supervision  capital  regulation  based on the
risks believed  inherent in the type of asset.  Core (Tier 1) capital is defined
as  common   stockholders'   equity  (including  retained   earnings),   certain
noncumulative  perpetual  preferred  stock  and  related  surplus  and  minority
interests in equity accounts of consolidated subsidiaries less intangibles other
than  certain  mortgage  servicing  rights and credit  card  relationships.  The
components of  supplementary  capital  currently  include  cumulative  preferred
stock,  long-term perpetual preferred stock,  mandatory convertible  securities,
subordinated  debt and intermediate  preferred stock, the allowance for loan and
lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45%
of  unrealized  gains  on  available-for-sale  equity  securities  with  readily
determinable fair market values.  Overall,  the amount of supplementary  capital
included as part of total capital cannot exceed 100% of core capital.

         The  capital   regulations  also  incorporate  an  interest  rate  risk
component.  Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating  their
risk-based  capital  requirements.  For the present  time,  the Office of Thrift
Supervision  has  deferred  implementation  of the  interest  rate risk  capital
charge.  At  December  31,  2000,  Lawrence  Federal  met  each  of its  capital
requirements.

         The following table presents  Lawrence  Federal's  capital  position at
December 31, 2000.


                                                                    Capital
                                                   Excess      -----------------
                         Actual     Required    (Deficiency)   Actual   Required
                         Capital     Capital       Amount      Percent   Percent
                         -------     -------       ------      -------   -------
                                          (Dollars in thousands)
Tangible.............    $12,996      $4,981        $8,015      10.44%     1.50%
Core (Leverage)......     12,996       4,981         8,015      10.44      4.00
Risk-based...........     13,771       7,190         6,581      15.32      8.00


         Prompt Corrective  Regulatory  Action. The Office of Thrift Supervision
is  required  to  take  certain  supervisory  actions  against  undercapitalized
institutions,  the severity of which  depends upon the  institution's  degree of
undercapitalization.  Generally, a savings institution that has a ratio of total
capital  to risk  weighted  assets  of less  than  8%,  a ratio of Tier 1 (core)
capital  to  risk-weighted  assets  of less  than 4% or a ratio of Tier 1 (core)
capital to total  assets of less than 4% (3% or less for  institutions  with the
highest  examination rating) is considered to be  "undercapitalized."  A savings
institution  that has a total  risk-based  capital  ratio less than 6%, a Tier 1
capital  ratio  of less  than 3% or a  leverage  ratio  that is less  than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible  capital to assets ratio equal to or less than 2% is deemed to be
"critically  undercapitalized."  Subject  to a narrow  exception,  the Office of
Thrift  Supervision  is  required to appoint a receiver  or  conservator  for an
institution that is "critically  undercapitalized." The regulation also provides
that a  capital  restoration  plan  must be filed  with  the  Office  of  Thrift
Supervision  within 45 days of the date a savings  institution  receives  notice
that it is "undercapitalized,"  "significantly  undercapitalized" or "critically
undercapitalized."  Compliance  with the plan must be  guaranteed  by any parent
holding company.  In addition,  numerous  mandatory  supervisory  actions become
immediately applicable to an undercapitalized  institution,  including,  but not
limited to,  increased  monitoring by  regulators  and  restrictions  on growth,
capital distributions and expansion. The Office of Thrift Supervision could also
take any one of a number of  discretionary  supervisory  actions,  including the
issuance of a capital directive and the replacement of senior executive officers
and directors.


                                       24

<PAGE>



         Insurance  of  Deposit  Accounts.  Lawrence  Federal is a member of the
Savings  Association  Insurance Fund. The Federal Deposit Insurance  Corporation
maintains a risk-based  assessment system by which  institutions are assigned to
one of  three  categories  based  on  their  capitalization  and  one  of  three
subcategories based on examination ratings and other supervisory information. An
institution's  assessment  rate  depends  upon  the  categories  to  which it is
assigned.  Assessment rates for insured institutions are determined semiannually
by the Federal Deposit Insurance Corporation and currently range from zero basis
points for the healthiest institutions to 27 basis points for the riskiest.

         In addition to the assessment for deposit  insurance,  institutions are
required  to make  payments on bonds  issued in the late 1980s by the  Financing
Corporation to recapitalize the predecessor to the Savings Association Insurance
Fund.  Since  January  1,  2000,  there  has been  equal  sharing  of  Financing
Corporation payments between members of both insurance funds.

         The Federal  Deposit  Insurance  Corporation  has authority to increase
insurance  assessments.  A significant increase in Savings Association Insurance
Fund  insurance  premiums  would likely have an adverse  effect on the operating
expenses  and results of  operations  of  Lawrence  Federal.  Management  cannot
predict what insurance assessment rates will be in the future.

         Insurance  of  deposits  may  be  terminated  by  the  Federal  Deposit
Insurance  Corporation upon a finding that the institution has engaged in unsafe
or  unsound  practices,  is  in an  unsafe  or  unsound  condition  to  continue
operations  or has violated  any  applicable  law,  regulation,  rule,  order or
condition imposed by the Federal Deposit Insurance  Corporation or the Office of
Thrift  Supervision.  The  management  of Lawrence  Federal does not know of any
practice,  condition  or  violation  that might lead to  termination  of deposit
insurance.

         Loans to One Borrower.  Federal law provides that savings  institutions
are  generally  subject to the  limits on loans to one  borrower  applicable  to
national banks. A savings  institution may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of its unimpaired  capital
and  surplus.  An  additional  amount  may be lent,  equal to 10% of  unimpaired
capital and surplus, if secured by specified readily marketable collateral.

         QTL Test. The HOLA requires  savings  institutions  to meet a qualified
thrift lender test. Under the test, a savings  association is required to either
qualify as a "domestic building and loan association" under the Internal Revenue
Code or maintain at least 65% of its "portfolio  assets" (total assets less: (1)
specified liquid assets up to 20% of total assets;  (2)  intangibles,  including
goodwill;  and (3) the value of property  used to conduct  business)  in certain
"qualified  thrift  investments"  (primarily  residential  mortgages and related
investments,  including certain mortgage-backed securities) in at least 9 months
out of each 12-month period.

         A savings  institution  that fails the qualified  thrift lender test is
subject to certain  operating  restrictions  and may be required to convert to a
bank charter. As of December 31, 2000, Lawrence Federal met the qualified thrift
lender test.  Recent  legislation  has  expanded  the extent to which  education
loans,  credit card loans and small business loans may be considered  "qualified
thrift investments."

         Limitations  on  Capital  Distributions.  Office of Thrift  Supervision
regulations  impose  limitations  upon all  capital  distributions  by a savings
institution,  including  cash  dividends,  payments to repurchase its shares and
payments to  shareholders  of another  institution in a cash-out  merger.  Under
current  regulations,  an application to and the prior approval of the Office of
Thrift  Supervision  is  required  prior  to  any  capital  distribution  if the
institution does not meet the criteria for "expedited treatment" of applications
under Office


                                       25

<PAGE>



of Thrift Supervision regulations (i.e.,  generally,  examination ratings in the
two top  categories),  the total  capital  distributions  for the calendar  year
exceed net income for that year plus the amount of  retained  net income for the
preceding two years,  the institution  would be  undercapitalized  following the
distribution  or the  distribution  would  otherwise  be  contrary to a statute,
regulation or agreement with Office of Thrift Supervision.  If an application is
not  required,  the  institution  must still  provide  prior notice to Office of
Thrift Supervision of the capital  distribution if, like Lawrence Federal, it is
a subsidiary of a holding company.  In the event Lawrence Federal's capital fell
below its regulatory  requirements or the Office of Thrift Supervision  notified
it  that it was in need of more  than  normal  supervision,  Lawrence  Federal's
ability to make capital  distributions  could be  restricted.  In addition,  the
Office of Thrift  Supervision could prohibit a proposed capital  distribution by
any  institution,  which would otherwise be permitted by the regulation,  if the
Office of Thrift Supervision  determines that such distribution would constitute
an unsafe or unsound practice.

         Assessments.  Savings  institutions  are required to pay assessments to
the Office of Thrift  Supervision to fund the agency's  operations.  The general
assessments,  paid  on a  semi-annual  basis,  are  computed  upon  the  savings
institution's total assets, including consolidated subsidiaries,  as reported in
Lawrence Federal's latest quarterly thrift financial report.

         Transactions  with Related  Parties.  Lawrence  Federal's  authority to
engage in transactions with "affiliates"  (e.g., any company that controls or is
under common control with an institution,  including  Lawrence Financial and its
non-savings  institution  subsidiaries) is limited by federal law. The aggregate
amount of covered  transactions with any individual  affiliate is limited to 10%
of the capital and surplus of the savings  institution.  The aggregate amount of
covered  transactions  with all  affiliates  is  limited  to 20% of the  savings
institution's  capital and surplus.  Certain  transactions  with  affiliates are
required to be secured by  collateral  in an amount and of a type  described  in
federal  law. The purchase of low quality  assets from  affiliates  is generally
prohibited.  The  transactions  with  affiliates  must  be on  terms  and  under
circumstances  that  are at  least  as  favorable  to the  institution  as those
prevailing  at  the  time  for  comparable   transactions  with   non-affiliated
companies. In addition,  savings institutions are prohibited from lending to any
affiliate  that is  engaged  in  activities  that are not  permissible  for bank
holding companies and no savings  institution may purchase the securities of any
affiliate other than a subsidiary.

         Lawrence  Federal's  authority to extend credit to executive  officers,
directors and 10%  shareholders  ("insiders"),  as well as entities such persons
control,  is also governed by federal law. Such loans are required to be made on
terms  substantially  the same as those offered to unaffiliated  individuals and
not involve  more than the normal risk of  repayment.  An  exception  exists for
loans  made  pursuant  to a  benefit  or  compensation  program  that is  widely
available to all employees of the  institution  and does not give  preference to
insiders over other employees.  The law limits both the individual and aggregate
amount  of loans  Lawrence  Federal  may make to  insiders  based,  in part,  on
Lawrence   Federal's  capital  position  and  requires  certain  board  approval
procedures to be followed. Loans to executive officers are subject to additional
restrictions.

         Enforcement.  The Office of Thrift Supervision has primary  enforcement
responsibility over savings  institutions and has the authority to bring actions
against  the  institution  and  all  institution-affiliated  parties,  including
stockholders,  and any attorneys,  appraisers and  accountants  who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution.  Formal enforcement action may range from the issuance of a
capital  directive  or cease and  desist  order to removal  of  officers  and/or
directors to  institution  of  receivership,  conservatorship  or termination of
deposit  insurance.  Civil  penalties  cover a wide range of violations  and can
amount to $25,000 per day, or even $1 million  per day in  especially  egregious
cases. The Federal Deposit Insurance Corporation has the authority to recommend


                                       26

<PAGE>



to the Director of the Office of Thrift  Supervision that enforcement  action to
be taken with  respect to a  particular  savings  institution.  If action is not
taken by the Director,  the Federal Deposit Insurance  Corporation has authority
to take such action under certain  circumstances.  Federal law also  establishes
criminal penalties for certain violations.

         Standards for Safety and Soundness.  The federal banking  agencies have
adopted Interagency  Guidelines  prescribing Standards for Safety and Soundness.
The  guidelines  set forth the safety and soundness  standards  that the federal
banking  agencies  use to identify  and address  problems at insured  depository
institutions   before  capital  becomes  impaired.   If  the  Office  of  Thrift
Supervision  determines  that a savings  institution  fails to meet any standard
prescribed by the guidelines,  the Office of Thrift  Supervision may require the
institution  to  submit  an  acceptable  plan to  achieve  compliance  with  the
standard.

Federal Home Loan Bank System

         Lawrence  Federal  is a member of the  Federal  Home Loan Bank  System,
which  consists of 12 regional  Federal  Home Loan Banks.  The Federal Home Loan
Bank  provides a central  credit  facility  primarily  for member  institutions.
Lawrence  Federal,  as a member of the  Federal  Home Loan Bank,  is required to
acquire and hold shares of capital  stock in that  Federal  Home Loan Bank in an
amount at least equal to 1.0% of the  aggregate  principal  amount of its unpaid
residential  mortgage  loans and similar  obligations  at the  beginning of each
year,  or 1/20 of its  advances  (borrowings)  from the Federal  Home Loan Bank,
whichever is greater.  Lawrence  Federal was in compliance with this requirement
with an  investment  in Federal  Home Loan Bank stock at  December  31,  2000 of
$549,100.

Federal Reserve System

         The Federal Reserve Board regulations  require savings  institutions to
maintain   non-interest-earning  reserves  against  their  transaction  accounts
(primarily NOW and regular checking accounts). The regulations generally provide
that reserves be maintained against aggregate  transaction  accounts as follows:
for accounts  aggregating  $44.3  million or less  (subject to adjustment by the
Federal  Reserve  Board)  the  reserve  requirement  is  3%;  and  for  accounts
aggregating  greater  than $44.3  million,  the  reserve  requirement  is $1.329
million plus 10% (subject to adjustment by the Federal  Reserve Board between 8%
and 14%) against that portion of total  transaction  accounts in excess of $44.3
million.  The first $5.0 million of otherwise  reservable  balances  (subject to
adjustments  by the  Federal  Reserve  Board)  are  exempted  from  the  reserve
requirements. Lawrence Federal complies with the foregoing requirements.

Prospective Legislation

         Lawrence Federal and Lawrence Financial,  as a savings and loan holding
company,  are extensively  regulated and supervised.  Regulations,  which affect
Lawrence  Federal  on a  daily  basis,  may be  changed  at any  time,  and  the
interpretation  of the relevant law and  regulations  may also change because of
new   interpretations   by  the  authorities  who  administer   those  laws  and
regulations.  Any change in the regulatory  structure or the applicable statutes
or regulations, whether by the Office of Thrift Supervision, the Federal Deposit
Insurance  Corporation  or the U.S.  Congress,  could have a material  impact on
Lawrence Financial, Lawrence Federal or its operations.

         Legislation  enacted several years ago provided that the Bank Insurance
Fund and the Savings Association  Insurance Fund would have merged on January 1,
1999 if there had been no more savings  associations  as of that date.  Congress
did not enact legislation eliminating the savings association charter


                                       27

<PAGE>



by that  date.  Lawrence  Federal  is  unable to  predict  whether  the  Savings
Association Insurance Fund and Bank Insurance Fund will eventually be merged and
what effect, if any, that may have on its business.


                           FEDERAL AND STATE TAXATION

Federal Income Taxation

         General. Lawrence Financial and Lawrence Federal report their income on
a calendar year basis using the accrual method of accounting. The federal income
tax laws apply to Lawrence  Financial and Lawrence Federal in the same manner as
to other  corporations  with some exceptions,  including  particularly  Lawrence
Federal's reserve for bad debts discussed below. The following discussion of tax
matters is intended only as a summary and does not purport to be a comprehensive
description  of the  tax  rules  applicable  to  Lawrence  Federal  or  Lawrence
Financial.  Lawrence  Federal's  federal  income tax  returns  have been  either
audited or closed under the statute of  limitations  through tax year 1995.  For
its 2000 year, Lawrence Federal's maximum federal income tax rate was 34%.

         Bad Debt Reserves. For fiscal years beginning before December 31, 1996,
thrift  institutions that qualified under certain  definitional  tests and other
conditions of the Internal Revenue Code were permitted to use certain  favorable
provisions  to  calculate  their  deductions  from  taxable  income  for  annual
additions to their bad debt  reserve.  A reserve  could be  established  for bad
debts on qualifying real property loans,  generally secured by interests in real
property  improved or to be improved,  under the  percentage  of taxable  income
method  or the  experience  method.  The  reserve  for  nonqualifying  loans was
computed using the experience method.

         Federal  legislation  enacted in 1996  repealed  the reserve  method of
accounting  for bad debts and the  percentage  of taxable  income method for tax
years beginning after 1995 and require savings institutions to recapture or take
into  income  certain   portions  of  their   accumulated   bad  debt  reserves.
Approximately  $1.5 million of Lawrence  Federal  accumulated  bad debt reserves
would not be  recaptured  into taxable  income unless  Lawrence  Federal makes a
"non-dividend distribution" to Lawrence Financial as described below.

         Distributions.  If Lawrence Federal makes "non-dividend  distributions"
to Lawrence  Financial,  the distributions  will be considered to have been made
from  Lawrence  Federal's  unrecaptured  tax bad debt  reserves,  including  the
balance  of  its  reserves  as of  December  31,  1988,  to  the  extent  of the
"non-dividend  distributions,"  and then from  Lawrence  Federal's  supplemental
reserve  for  losses on loans,  to the extent of those  reserves,  and an amount
based on the amount distributed, but not more than the amount of those reserves,
will  be  included   in  Lawrence   Federal's   taxable   income.   Non-dividend
distributions  include distributions in excess of Lawrence Federal's current and
accumulated earnings and profits, as calculated for federal income tax purposes,
distributions in redemption of stock,  and  distributions in partial or complete
liquidation.  Dividends  paid out of Lawrence  Federal's  current or accumulated
earnings  and profits  will not be so included  in  Lawrence  Federal's  taxable
income.

         The amount of additional  taxable income triggered by a non-dividend is
an amount that, when reduced by the tax attributable to the income,  is equal to
the  amount  of  the  distribution.  Therefore,  if  Lawrence  Federal  makes  a
non-dividend distribution to Lawrence Financial,  approximately one and one-half
times the amount of the distribution not in excess of the amount of the reserves
would be  includable in income for federal  income tax purposes,  assuming a 35%
federal  corporate  income  tax rate.  Lawrence  Federal  does not intend to pay
dividends  that  would  result in a  recapture  of any  portion  of its bad debt
reserves.


                                       28

<PAGE>



State Taxation

         Ohio  State  Taxation.  Lawrence  Financial  is  subject  to  the  Ohio
corporation  franchise tax,  which,  as applied to it, is a tax measured by both
net income and net worth.  In general,  the tax liability is the greater of 5.1%
on the first $50,000 of computed  Ohio taxable  income and 8.5% of computed Ohio
taxable income in excess of $50,000,  or 0.40% of taxable net worth. Under these
alternative measures of computing the tax liability,  complex formulas determine
the  jurisdictions to which total net income and total net worth are apportioned
or  allocated.  The minimum tax is $50 per year and  maximum  tax  liability  as
measured by net worth is limited to $150,000 per year.

         A  special  litter  tax also  applies  to all  corporations,  including
Lawrence Financial,  subject to the Ohio corporation  franchise tax. This litter
tax does not apply to "financial  institutions." If a corporation pays franchise
tax on the basis of net  income,  the  litter tax is equal to 0.11% of the first
$50,000 of  computed  Ohio  taxable  income and 0.22% of computed  Ohio  taxable
income in excess of $50,000. If a corporation pays franchise tax on the basis of
net worth, the litter tax is equal to 0.014% times taxable net worth.

         A statutory  exemption  from the net worth tax is available to Lawrence
Financial if certain  conditions are satisfied.  Lawrence  Financial  expects to
qualify for this  exemption,  which would  restrict its tax liability to the tax
measured by net income.

         Lawrence  Federal is a "financial  institution"  for Ohio tax purposes.
Accordingly,  it  must  pay  the  Ohio  corporate  franchise  tax on  "financial
institutions,"  which  is  imposed  annually  at a rate of 1.4% of the  Lawrence
Federal's  apportioned  book net  worth,  determined  under  generally  accepted
accounting principles,  less any statutory deduction. This tax rate is scheduled
to decrease to 1.3% in the year 2000.  As a  "financial  institution,"  Lawrence
Federal does not pay any Ohio tax based upon net income or net profits.

         Maryland State Taxation.  As a Maryland  corporation not earning income
in Maryland, Lawrence Financial is exempt from Maryland corporate income tax.


                                       29

<PAGE>


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

         Lawrence  Federal  currently  conducts  its  business  through its main
office located in Ironton,  Ohio, and four other  full-service  banking offices,
all of which it owns.


                                                                 Net Book Value
                                                                  of Property
                                    Original                      or Leasehold
                                      Year                      Improvements at
 Location                           Acquired                   December 31, 2000
 --------                           --------                   -----------------
Main/Executive Office:                                           (In thousands)

311 South 5th Street
Ironton, Ohio  45638                   1976                           $  746


Drive Through Facility:

511 Vernon Street
Ironton, Ohio  45638                   1997                              194

Branch Offices:

401 2nd Avenue
Chesapeake, Ohio  45619                1960                               69

7510 State Route 7
Proctorville, Ohio  45669              1993                              152

404 Solida Road
South Point, Ohio  45680               1975                              161

9000 Ohio River Road
Wheelersburg, Ohio  45694              1998                              669
                                                                      ------
         Total                                                        $1,991
                                                                      ======


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

         Periodically,  there have been various  claims and  lawsuits  involving
Lawrence Federal, such as claims to enforce liens,  condemnation  proceedings on
properties in which Lawrence Federal holds security interests,  claims involving
the making and  servicing of real  property  loans and other issues  incident to
Lawrence Federal's business.  Neither Lawrence Financial nor Lawrence Federal is
not a party to any  pending  legal  proceedings  that it  believes  would have a
material  adverse  effect on the  financial  condition or operations of Lawrence
Financial.


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

         None.


                                       30

<PAGE>


                                     PART II

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

         Lawrence  Financial's  common stock began  trading on the  OTC-Bulletin
Board under the symbol "LWFH" on December 29, 2000.  The initial  offering price
was $10.00 per share.  As of December  31, 2000,  there were  775,827  shares of
common stock outstanding and 288 stockholders, excluding persons or entities who
hold stock in nominee or "street  name." The price of common  stock on  December
29,  2000  ranged  from a high of $11.125 to a low of  $10.625.  The  quotations
reflect  inter-dealer prices,  without retail mark-up,  mark-down or commission,
and may not represent actual transactions.

         Dividend  payments by Lawrence  Financial  are  dependent  primarily on
dividends  received by Lawrence  Financial from Lawrence Federal.  Under federal
regulations,  the  dollar  amount  of  dividends  Lawrence  Federal  may  pay is
dependent  upon its  capital  position  and recent  net  income.  Generally,  if
Lawrence  Federal  satisfies its regulatory  capital  requirements,  it may make
dividend  payments  up to the  limits  prescribed  by the  OTS  regulations.  In
addition,  institutions  that have  converted to the stock form of ownership are
prohibited  from engaging in such  activities if the effect  thereof would cause
the  regulatory  capital  of the  institution  to be  reduced  below the  amount
required for the liquidation  account which was established in the conversion in
accordance with the Office of Thrift Supervision regulations.

Use of Proceeds

         The  following   information  is  provided  with  respect  to  Lawrence
Financial's initial public sale of its common stock.

          o    The  effective  date of the  Registration  Statement on Form SB-2
               (File No. 333-45404) was November 13, 2000.

          o    The offering was not underwritten.  Keefe, Bruyette & Woods, Inc.
               acted as marketing agent for the offering.

          o    The class of securities  registered  was common stock,  $0.01 par
               value  per  share.   The  aggregate  amount  of  such  securities
               registered  was 859,625 shares at an offering price of $10.00 per
               share. The offering terminated on December 29, 2000 with the sale
               of 775,827 shares at a price of $10.00 per share.

          o    The  total  offering   expenses  incurred  by  the  company  were
               approximately  $685,495,  none of  which  was  paid  directly  or
               indirectly  to  directors  and  officers  of the company or their
               associates.

          o    The net  proceeds  of the  offering  were $7.76  million of which
               $620,660 was lent to Lawrence  Federal's employee stock ownership
               plan to purchase stock in the offering.  Five million  dollars of
               the net  proceeds  were  invested  in  Lawrence  Federal  and the
               remaining  proceeds were invested in short-term  interest-earning
               assets.  This use of net proceeds is materially  consistent  with
               the use of net proceeds described in the prospectus.



                                       31

<PAGE>



Item 6. Management's  Discussion and Analysis of Financial Condition and Results
------- ------------  ----------------------------------------------------------
        of Operations
        -------------

General

         Lawrence  Federal's  results  of  operations  depend  primarily  on net
interest income,  which is the difference  between the interest income earned on
Lawrence Federal's  interest-earning  assets, such as loans and securities,  and
the interest expense on its interest-bearing  liabilities,  such as deposits and
borrowings.  Lawrence Federal also generates  noninterest  income primarily from
loan fees and service charges. Lawrence Federal's noninterest expenses primarily
consist  of  employee   compensation  and  benefits,   occupancy  expense,  data
processing costs, and other operating  expenses.  Lawrence  Federal's results of
operations  are also affected by general  economic and  competitive  conditions,
notably changes in market interest rates, government policies and regulations.

Operating Strategy

         Lawrence  Financial,  through  its  wholly  owned  subsidiary  Lawrence
Federal,  operates  as a  community-oriented  financial  institution  focused on
meeting  the  financial  service  needs of  consumers  in its  market  area.  To
accomplish  this  objective,  Lawrence  Federal offers a variety of mortgage and
consumer loans and retail deposit  products.  Lawrence  Federal has extended its
lending  activities  outside of its market area through programs for originating
mobile home and  automobile  loans through a network of dealers.  These indirect
lending  programs  help Lawrence  Federal  originate a larger amount of consumer
loans, which typically have shorter terms and higher yields than mortgage loans,
than Lawrence  Federal would  otherwise be able to originate.  In addition,  the
origination  of shorter term consumer  loans helps  Lawrence  Federal manage its
interest  rate risk.  Lawrence  Federal  intends to continue to focus on further
expansion of its non- mortgage lending.

Comparison of Financial Condition at December 31, 2000 and 1999

         During fiscal year 2000, total assets increased $20.9 million,  or 20%,
to $123.8 million at December 31, 2000. The increase in assets in 2000 primarily
reflects growth in the loan portfolio.  During the year ended December 31, 2000,
loans receivable grew $26.6 million,  or 34%. Consumer loans grew $18.7 million,
or 253%, real estate loans grew $2.7 million,  or 5%, and mobile home loans grew
$4.5  million,  or 33%. The majority of the growth in consumer  loans is tied to
the indirect  automobile  lending program which began in April 2000,  while real
estate loans  increased as a result of market demand and increased  marketing by
Lawrence  Federal.  Mobile  home  loans  increased  as  a  result  of  increased
origination efforts by the third party through which Lawrence Federal originates
most of its mobile home loans. The fair market value of Lawrence  Federal's long
term investments, held in the form of securities,  decreased in fiscal year 2000
by $5.3 million,  or 43%, as Lawrence  Financial used the liquidity  provided by
these assets to fund the growth of higher yielding loans.  Lawrence  Financial's
available  cash and cash  equivalents  were also put to work as funding for loan
growth  resulting  in a decrease  of $2.5  million,  or 53%,  for the year ended
December 31, 2000.

         During 2000, total deposits and borrowings  increased $13.4 million, or
14%, to $108.2 million at December 31, 2000. For the fiscal year 2000,  deposits
increased $12.9 million,  or 14%, and Federal Home Loan Bank advances  increased
by $0.5 million as Lawrence Financial relied on deposits to fund the majority of
the loan  growth.  Deposits  grew during  this  period as a result of  marketing
efforts and aggressively priced products.


                                       32

<PAGE>


         Equity increased $7.1 million, or 93%, during fiscal year 2000 to $14.9
million at December 31, 2000. On December 28, 2000, Lawrence Financial completed
its  initial  public  offering in  connection  with the  conversion  of Lawrence
Federal to stock form.  Lawrence  Financial  sold  775,827  shares at $10.00 per
share,  generating $7.8 million in gross proceeds to Lawrence Financial.  During
the year ending December 31, 2000,  retained  earnings  increased  $422,000 as a
result of net income while accumulated other comprehensive  income improved from
an unrealized loss of $341,000 to an unrealized loss of $58,000,  primarily as a
result of changes to the securities  available-for-sale portfolio arising during
the period.

Comparison of Operating Results for the Years Ended December 31, 2000 and 1999

         General.  Lawrence Financial's net income decreased 22% to $422,000 for
2000 from  $543,000  for 1999.  Return on  average  assets was 0.38% in 2000 and
0.54% in 1999, and return on average equity was 5.10% in 2000 and 6.92% in 1999.
Net  interest  income  increased  $417,000,  or 14%,  while  noninterest  income
decreased $60,000,  or 14%, primarily as a result of losses taken on the sale of
securities.  The increase in net interest income was primarily the result of the
increase in the size of the loan  portfolio and,  secondarily,  the result of an
increased yield on  interest-earning  assets,  which was partially  offset by an
increased cost of funds.  Offsetting  the increase in net interest  income was a
16% increase in noninterest expense,  which was primarily the result of indirect
costs  associated  with the  conversion to a stock  corporation  and the overall
growth of Lawrence  Financial.  Noninterest  expense  increases  occurred in the
categories of salaries and benefits, data processing,  professional services and
office supplies.

         Interest  Income.  Interest income  increased $1.3 million,  or 19%, in
2000 compared to 1999.  Interest income on loans increased $1.5 million, or 25%,
primarily as a result of growth of the loan  portfolio  and, to a lesser extent,
as a result of the increase in the yield on the  portfolio.  Interest  income on
short-term  investments  decreased $102,000,  or 61%, primarily as a result of a
smaller average balance in 2000 as Lawrence Financial used liquid assets to fund
loan  originations.  The average yield on  interest-earning  assets  improved to
8.05% in 2000  from  7.48%  in 1999,  as  loans  became a higher  percentage  of
interest-earning assets and the yield on the portfolio increased.

         Interest Expense.  Interest expense increased $872,000, or 21%, in 2000
compared to 1999.  Interest paid on deposits  increased  $562,000,  or 14%, as a
result of growth in deposit accounts and the increase in rates paid on deposits.
Interest  paid on Federal Home Loan Bank  advances was $346,000 in 2000 compared
to $36,000 in 1999.  The average cost of  interest-bearing  liabilities  rose to
4.80% in 2000 from 4.35% in 1999,  primarily as a result of higher  market rates
on certificates of deposits and the addition of higher costing Federal Home Loan
Bank advances.

         Provision  for Loan Losses.  Activity in the  allowance for loan losses
consists of increases  due to monthly  provisions  for loan losses and decreases
for periodic charge offs, net of recoveries. Management analyzes the adequacy of
the allowance  balance  quarterly by determining its estimate of probable losses
in  the  portfolio  and  comparing  that  estimate  to  the  allowance  balance.
Management  calculates  its  estimate of probable  losses  primarily by applying
expected loss percentages to classified loans and major loan categories.  During
the first half of 2000,  Lawrence Financial began an indirect automobile lending
program. As this was a new program for Lawrence Financial and because management
believed that indirect automobile loans represented  different risk factors than
direct  loans,  a  separate  loss  percentage  was  established.  Also in  2000,
management  reevaluated  the loss  percentage  used for determining the required
allowance for direct consumer loans. The impact of these events are described in
more  detail  below  as part of the  discussion  comparing  the  1999  and  2000
provisions for loan losses.



                                       33

<PAGE>


         The  provision  for loan  losses  was  $295,000  for 2000  compared  to
$120,000  for  1999.  The  provision  for 2000 and 1999  reflected  management's
assessment of probable  losses,  which is impacted by loan growth and changes in
the  composition  of the loan  portfolio,  particularly  the growth of  indirect
automobile,  indirect  mobile  home,  and direct  consumer  loans.  Management's
assessment of probable  losses in the loan portfolio  related to direct consumer
loans  decreased for 2000 when compared to 1999,  primarily due to  management's
reevaluation of Lawrence Federal's historic loss percentage and consideration of
other factors such as peer comparisons,  underwriting quality and local economic
conditions.  Although peer loss experiences for other types of lending have been
lower in 2000 compared to 1999,  management's estimate of probable losses in the
reminder  of  the  portfolio  remained  constant  due to  potentially  declining
economic  conditions  in the market.  While the  economy in Lawrence  County has
generally  been good the past few years,  recent plant closings have resulted in
job losses.  Over the past several years,  unemployment  in Lawrence  County has
been  greater  than the state and  national  rate.  Management  considers  these
factors when calculating its estimate of the required level of the allowance for
loan losses.

         Management  believes that the average  balance of outstanding  indirect
automobile  loans  will not grow  significantly  beyond  its  ending  balance at
December  31,  2000.  Management  anticipates  that its estimate of the required
level of  allowance  associated  with  Lawrence  Federal's  indirect  automobile
lending  program will  decrease  when  compared to 2000 but will increase if the
bank  experiences  growth in its loan volume or an  unexpected  increase in loan
delinquency.

         While  management  believes the existing level of reserves is adequate,
future adjustments to the allowance may be necessary due to economic, operating,
regulatory, and other conditions that may be beyond Lawrence Federal's control.

         Noninterest  Income.  The  following  table  shows  the  components  of
noninterest income and the dollar and percentage change from 1999 to 2000.


                                                            Dollar    Percentage
                                    2000         1999       Change      Change
                                    ----         ----       ------      ------
                                            (Dollars in Thousands)
Net securities gains (losses)....  ($157)      $    2        ($155)      N/A
Service charges..................    375          288           87        30%
Other............................    149          136           13        10
                                   -----        -----       ------
      Total......................   $367         $426         ($56)      (13%)
                                    ====         ====       ======

         Net securities  gains  decreased in 2000 as Lawrence  Federal sold some
securities at a loss in order to increase the  Company's  overall yield by using
the funds  generated  by the sales to fund  growth  in  higher  yielding  loans.
Service charges increased in 2000 as a result of growth in the number of deposit
accounts. Other income consists of increases in the cash surrender value of life
insurance policies and other miscellaneous items.



                                       34

<PAGE>


         Noninterest  Expense.  The  following  table  shows the  components  of
noninterest expense and the dollar and percentage change from 1999 to 2000.


                                                              Dollar  Percentage
                                2000           1999           Change     Change
                                ----           ----           ------     ------
                                            (Dollars in Thousands)
Salaries and benefits........   $1,229         $1,021           $208       20%
Deposit insurance premiums...       19             52            (33)     (63)
Occupancy and equipment......      351            313             38       12
Data processing..............      429            358             71       20
Franchise tax................       91            106            (15)     (14)
Advertising expense..........       99             97              2        2
Other........................      565            455            110       24
                               -------        -------          -----
      Total..................   $2,783         $2,402           $381       16%
                                ======         ======           ====

         Salaries  and  benefits  increased  as a result of normal  annual merit
increases  in salaries,  the  addition of  personnel  to the  indirect  lending,
marketing and finance areas,  and the  recognition of the expense related to the
first year of the ESOP ($68,200 for the year 2000).  Deposit insurance  premiums
decreased  as a  result  of  changes  in the  assessment  rates.  Occupancy  and
equipment  increased as a result of increases in taxes,  depreciation  and other
related  expenses  associated with growth of Lawrence  Federal's  customer base.
Data  processing  increased  as a result of the growth in the number of loan and
deposit  accounts  maintained.  Other  expenses,  which consist of  professional
services,  office supplies,  postage,  telephone and other miscellaneous  items,
increased  as  a  result  of  growth  of  Lawrence  Federal  and  new  reporting
requirements of a publicly traded company.

         Income Tax Expense.  The  provision for income tax was $172,400 in 2000
compared to  $249,700  in 1999.  The  provision  decreased  as a result of lower
taxable  income.  The effective tax rate for 2000 was 29.0%  compared with 31.1%
for 1999.



                                       35

<PAGE>

Average Balances, Interest and Average Yields/Cost

         The following  table presents  certain  information  regarding  average
balances  of assets  and  liabilities,  as well as the total  dollar  amounts of
interest  income from average  interest-earning  assets and interest  expense on
average interest-bearing liabilities and the resulting average yields and costs.
The yields and costs for the periods indicated are derived by dividing income or
expense by the average balances of assets or liabilities,  respectively, for the
periods presented. Average balances were derived from daily balances.

<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                      -------------------------------------------------------------------------
                                                                          2000                                  1999
                                                      ---------------------------------------    ------------------------------
                                                                                      Average                           Average
                                                        Average                        Yield/    Average                 Yield/
                                                        Balance       Interest          Rate     Balance     Interest     Rate
                                                        -------       --------          ----     -------     --------     ----
                                                                                   (Dollars in Thousands)
Interest-earning assets:
<S>                                                   <C>            <C>                <C>   <C>           <C>           <C>
   Loans (1) .....................................    $  90,696      $   7,492          8.26% $  73,664     $   6,003     8.15%
   Securities (2) ................................       10,671            679          6.36     14,463           802     5.55
   Interest-bearing deposits .....................          899             65          7.23      2,726           143     5.24
                                                      ---------      ---------                 --------     ---------
     Total interest-earning assets ...............      102,266          8,236          8.05     90,853         6,948     7.64
Non-interest-earning assets ......................        9,233                                  10,199
                                                      ---------                               ---------
         Total assets ............................    $ 111,499                               $ 101,052
                                                      =========                               =========
Interest-bearing liabilities:
   Deposits:
      Passbook accounts ..........................    $  18,690            510          2.73  $  18,353           534     2.91
      Money market accounts ......................          881             24          2.72        752            21     2.85
      NOW accounts ...............................       12,398            257          2.07     10,501           233     2.22
      Certificates of deposit ....................       65,682          3,793          5.77     61,241         3,234     5.28
                                                      ---------       --------                ---------      --------
         Total deposits ..........................       97,651          4,584          4.69     90,847         4,022     4.43
   FHLB advances .................................        5,172            346          6.69        633            36     5.64
                                                      ---------       --------                ---------      --------
         Total interest-bearing
           liabilities ...........................      102,823          4,930          4.79     91,480         4,058     4.44
Non-interest-bearing liabilities .................          388       --------                    1,727      --------
                                                      ---------                               ---------
         Total liabilities .......................      103,211                                  93,207
Total retained earnings ..........................        8,278                                   7,845
                                                      ---------                               ---------
         Total liabilities and retained
           earnings ..............................    $ 111,489                               $ 101,052
                                                      =========                               =========
   Net interest-earning assets ...................    $    (557)                              $    (627)
                                                      =========                               =========
   Net interest income/interest
    rate spread(3) ...............................                   $   3,306          3.26%               $   2,890     3.20%
                                                                     =========          ====                =========     ====
   Net interest margin(4) ........................                        3.23%                                  3.18%
                                                                     =========                              =========
   Ratio of interest-earning assets to
    interest-bearing liabilities .................        99.46%                                  99.31%
                                                      =========                                ========
</TABLE>

-------
(1)  Balances are net of deferred  loan  origination  costs,  allowance for loan
     losses,  undisbursed proceeds of construction loans in process, and include
     non-accrual loans.
(2)  Includes  investment  securities  available-for-sale,  stock in the Federal
     Home Loan Bank of Cincinnati and mutual funds.
(3)  Net interest rate spread  represents  the  difference  between the weighted
     average yield on  interest-earning  assets and the weighted average cost of
     interest-bearing liabilities.
(4)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.


                                       36

<PAGE>


Rate/Volume Analysis

         The following  table presents the effects of changing rates and volumes
on the interest income and interest expense of Lawrence Federal. The rate column
shows the effects attributable to changes in rate (changes in rate multiplied by
current volume).  The volume column shows the effects attributable to changes in
volume (changes in volume  multiplied by prior rate). The net column  represents
the sum of the prior columns.  For purposes of this table,  changes attributable
to changes in both rate and volume that cannot be segregated have been allocated
proportionately  based on the  absolute  value of the change due to rate and the
change due to volume.


                                                Year Ended December 31, 2000
                                                         Compared to
                                                Year Ended December 31, 1999
                                              ----------------------------------
                                               Increase (Decrease)
                                                     Due to
                                              ---------------------
                                                Rate        Volume        Net
                                                ----        ------        ---
                                                     (Dollars in thousands)
Interest-earning assets:
   Loans ................................     $   100      $ 1,389      $ 1,489
   Securities ...........................          88         (211)        (123)
   Interest-earning deposits ............          18          (96)         (78)
                                              -------      -------      -------
         Total interest-earning
          assets ........................     $   206      $ 1,082      $ 1,288
Interest-bearing liabilities:
   Deposits:
      Passbook accounts .................     $   (34)     $    10      $   (24)
      Money market accounts .............          (1)           4            3
      NOW accounts ......................         (18)          42           24
      Certificates of deposit ...........         367          192          559
  FHLB advances .........................          54          256          310
                                              -------      -------      -------
         Total interest-bearing
          liabilities ...................         368          504          872
                                              -------      -------      -------
Increase (decrease) in net interest
 income .................................     $  (162)     $   578      $   416
                                              =======      =======      =======


Management of Interest Rate Risk and Market Risk Analysis

         Qualitative Aspects of Market Risk. Lawrence Federal's most significant
form of market risk is interest rate risk. The principal  objectives of Lawrence
Federal's  interest rate risk  management are to evaluate the interest rate risk
inherent  in  certain  balance  sheet  accounts,  determine  the  level  of risk
appropriate given Lawrence Federal's business strategy,  operating  environment,
capital and liquidity  requirements and performance  objectives,  and manage the
risk  consistent  with the Board of  Director's  approved  guidelines.  Lawrence
Federal  has  an  Asset/Liability  Committee,   responsible  for  reviewing  its
asset/liability  policies and interest rate risk  position,  which meets monthly
and reports  trends and  interest  rate risk  position to the Board of Directors
quarterly.  The extent of the movement of interest rates is an uncertainty  that
could have a negative impact on the earnings of Lawrence Federal.

         Lawrence  Federal's  assets  include a high  percentage  of  fixed-rate
mortgage loans. This exposes Lawrence Federal to the risk that during periods of
rising interest rates Lawrence  Federal's  interest expense will increase faster
than its  interest  income.  In  recent  years,  Lawrence  Federal  has used the
following  strategies to manage interest rate risk: (1) emphasizing shorter term
consumer  loans;  (2)  maintaining  a  high  quality   portfolio  of  short-  to
intermediate-term  securities; (3) maintaining high levels of liquidity; and (4)
emphasizing  longer-term  certificates of deposit to better structure maturities
of its interest rate sensitive


                                       37

<PAGE>


liabilities.   Lawrence   Federal   intends  to   increase   its   emphasis   on
adjustable-rate  loans and to sell the fixed- rate loans that it  originates  in
order to help reduce its interest rate risk. Lawrence Federal currently does not
participate  in  hedging  programs,  interest  rate  swaps or  other  activities
involving the use of off-balance sheet derivative  financial  instruments.  More
recently, Lawrence Federal has used some of its excess liquidity to increase its
loan  portfolio.  As liquidity is reduced,  Lawrence  Federal's  sensitivity  to
interest rate movements is expected to increase.

         Quantitative   Aspects  of  Market  Risk.  Lawrence  Federal  primarily
utilizes  an  interest  sensitivity  analysis  prepared  by the Office of Thrift
Supervision  to review the level of interest rate risk.  This analysis  measures
interest rate risk by computing  changes in the net portfolio  value of Lawrence
Federal's cash flows from assets, liabilities and off-balance sheet items in the
event of a range of assumed  changes in market  interest  rates.  Net  portfolio
value represents the market value of portfolio equity and is equal to the market
value of assets minus the market value of liabilities, with adjustments made for
off-balance  sheet items. This analysis assesses the risk of loss in market risk
sensitive  instruments  in the event of a sudden and  sustained 100 to 300 basis
point increase or decrease in market  interest rates with no effect given to any
steps that  management  might take to counter the effect of that  interest  rate
movement.  The  following  table,  which  is based on  information  provided  to
Lawrence  Federal by the Office of Thrift  Supervision,  presents  the change in
Lawrence  Federal's net portfolio  value at December 31, 2000,  that would occur
upon an immediate change in interest rates based on Office of Thrift Supervision
assumptions,  but without giving effect to any steps that management  might take
to counteract that change.


                                                           NPV as % of Portfolio
  Change in                                                   Value of Assets
  Interest Rates           Net Portfolio Value             ---------------------
 In Basis Points   ------------------------------------    NPV
  (Rate Shock)       Amount     $ Change       % Change    Ratio     Change(1)
  ------------       ------     --------       --------    -----     ---------
                            (Dollars in thousands)
      300          $  6,142      $(5,019)          (45)%    5.28%     (380)
      200             7,865       (3,296)          (30)     6.63      (245)
      100             9,579       (1,582)          (14)     7.92      (115)
     Static          11,161           --            --      9.07        --
     (100)           12,386        1,224            11      9.93        85
     (200)           13,911        2,750            25     10.97       189
     (300)           16,046        4,885            44     12.39       332

-------
(1)  Expressed in basis points.

         The  preceding  table shows that in the event of a sudden and sustained
increase in market  interest  rates of 2% or more,  the net  portfolio  value of
Lawrence  Federal  would  decrease  moderately.  Prior to  conversion,  Lawrence
Federal was considered to have a "high" level of interest rate risk under Office
of Thrift  Supervision  guidelines.  As a result of Lawrence  Financial's  stock
offering,  Lawrence  Financial  invested  $5.0  million in Lawrence  Federal and
reduced Lawrence Federal's interest rate risk to "moderate."

         The Office of Thrift Supervision uses certain  assumptions in assessing
the interest  rate risk of savings  associations.  These  assumptions  relate to
interest  rates,  loan  prepayment  rates,  deposit decay rates,  and the market
values of certain assets under differing interest rate scenarios, among others.

         As  with  any  method  of  measuring   interest   rate  risk,   certain
shortcomings  are inherent in the method of analysis  presented in the foregoing
table. For example, although certain assets and liabilities may have


                                       38

<PAGE>



similar maturities or periods to repricing,  they may react in different degrees
to changes in market interest  rates.  Also, 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,  certain  assets,  such as adjustable rate mortgage loans,
have features which restrict changes in interest rates on a short-term basis and
over the life of the asset. Further, if interest rates change, expected rates of
prepayments on loans and early  withdrawals  from  certificates of deposit could
deviate significantly from those assumed in calculating the table.

Liquidity and Capital Resources

         Liquidity  is  the  ability  to  meet  current  and  future   financial
obligations of a short-term  nature.  Lawrence Federal further defines liquidity
as the ability to respond to the needs of  depositors  and  borrowers as well as
maintaining  the  flexibility  to take  advantage of  investment  opportunities.
Lawrence  Federal's  primary sources of funds consist of deposit  inflows,  loan
repayments,  maturities and sales of investment  securities and borrowings  from
the Federal Home Loan Bank. While maturities and scheduled amortization of loans
and  securities  are  predictable  sources of funds,  deposit flows and mortgage
prepayments  are  greatly   influenced  by  general  interest  rates,   economic
conditions and competition.

         Liquidity  management is both a daily and long-term  responsibility  of
management. Lawrence Federal adjusts its investments in liquid assets based upon
management's assessment of (1) expected loan demand, (2) expected deposit flows,
(3) yields available on  interest-earning  deposits and securities,  and (4) the
objectives of its asset/liability  management program.  Excess liquid assets are
invested  generally  in  interest-earning  overnight  deposits  and  short-  and
intermediate-term U.S. Government and agency obligations.

         Lawrence   Federal's   most  liquid  assets  are  cash  and  short-term
investments  (securities  maturing  in one year or  less).  The  levels of these
assets are dependent on Lawrence  Federal's  operating,  financing,  lending and
investing  activities  during any given period.  At December 31, 2000,  cash and
short-term   investments   totaled  $2.7  million.   Securities   classified  as
available-for-sale  totaled $6.4 million at December 31, 2000.  In addition,  at
December 31, 2000,  Lawrence  Federal had arranged the ability to borrow a total
of approximately $10.0 million from the Federal Home Loan Bank of Cincinnati. On
that date, Lawrence Federal had advances outstanding of $5.0 million.

         The  primary   investing   activities  of  Lawrence   Federal  are  the
origination of loans and the purchase of securities.  In 2000,  Lawrence Federal
originated  $53.0 million of loans and purchased $2.0 million of securities.  In
1999,  Lawrence  Federal  originated  $29.2 million of loans and purchased  $2.2
million of securities.

         Financing  activities consist primarily of activity in deposit accounts
and Federal Home Loan Bank advances. Lawrence Federal experienced a net increase
in  total  deposits  of  $12.9  million  and $1.8  million  for  2000 and  1999,
respectively. Deposit flows are affected by the overall level of interest rates,
the  interest  rates and  products  offered by  Lawrence  Federal  and its local
competitors and other factors. Lawrence Federal generally manages the pricing of
its  deposits to be  competitive  and to increase  core  deposit  relationships.
Occasionally,  Lawrence  Federal  offers  promotional  rates on certain  deposit
products in order to attract deposits.  In 2000, Federal Home Loan Bank advances
increased $0.5 million.  During 1999,  Federal Home Loan Bank advances increased
$4.5 million.


                                       39

<PAGE>



         At December 31, 2000,  Lawrence Federal had outstanding  commitments to
originate loans of $622,500,  $443,500 of which had fixed interest rates.  These
loans are to be secured by  properties  located  in its  market  area.  Lawrence
Federal  anticipates  that it will have  sufficient  funds available to meet its
current loan commitments.  Loan commitments have, in recent periods, been funded
through liquidity or through Federal Home Loan Bank borrowings.  Certificates of
deposit that are  scheduled to mature in one year or less from December 31, 2000
totaled $55  million.  Management  believes,  based on past  experience,  that a
significant  portion of those deposits will remain with Lawrence Federal.  Based
on the foregoing, Lawrence Federal considers its liquidity and capital resources
sufficient to meet its outstanding short-term and long-term needs.

         Lawrence Federal is subject to various regulatory capital  requirements
administered by the Office of Thrift Supervision  including a risk-based capital
measure.  The risk-based capital guidelines include both a definition of capital
and a framework for calculating  risk-weighted assets by assigning balance sheet
assets and  off-balance  sheet items to broad risk  categories.  At December 31,
2000,  Lawrence  Federal  exceeded all of its regulatory  capital  requirements.
Lawrence Federal is considered "well capitalized"  under regulatory  guidelines.
See "Regulation and Supervision--Federal Savings Institution Regulation--Capital
Requirements"  and "Regulatory  Capital  Compliance" and note 11 of the notes to
the financial statements.

         The capital from the conversion  significantly  increased liquidity and
capital resources.  Over time, the initial level of liquidity will be reduced as
net proceeds from the stock  offering are used for general  corporate  purposes,
including  the  funding  of lending  activities.  Lawrence  Federal's  financial
condition  and results of  operations  will be enhanced by the capital  from the
conversion,  resulting in increased net interest-earning  assets and net income.
However,  due to the  large  increase  in  equity  resulting  from  the  capital
injection, return on equity will be adversely impacted following the conversion.

Impact of Accounting Pronouncements

         Accounting for Derivative Instruments and Hedging Activities. Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging Activities," issued in June 1998 (as amended by SFAS No.
137), standardizes the accounting for derivative instruments,  including certain
derivative  instruments  embedded in other  contracts.  The  statement  requires
entities to carry all  derivative  instruments  in the  statement  of  financial
position at fair value. The accounting for changes in the fair value,  gains and
losses, of a derivative instrument depends on whether it has been designated and
qualifies  as part of a hedging  relationship  and,  if so, on the  reasons  for
holding it. If certain  conditions  are met,  entities  may elect to designate a
derivative  instrument  as a hedge of exposures  to changes in fair value,  cash
flows or foreign  currencies.  The  statement  is  effective  for  fiscal  years
beginning  after June 15, 2000.  The statement did not affect  Lawrence  Federal
because Lawrence Federal does not currently purchase  derivative  instruments or
enter into hedging activities.

Effect of Inflation and Changing Prices

         The  consolidated  financial  statements  and  related  financial  data
presented in this prospectus  have been prepared  following  generally  accepted
accounting  principles,  which require 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
primary  impact of  inflation is  reflected  in the  increased  cost of Lawrence
Federal's operations. Unlike most industrial companies, virtually all the assets
and liabilities of a financial  institution are monetary in nature. As a result,
interest  rates  generally  have  a  more  significant  impact  on  a  financial
institution's performance than do general levels of inflation. Interest rates do
not  necessarily  move in the same direction or to the same extent as the prices
of goods and services.


                                       40

<PAGE>


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

         The  financial  statements  beginning on page F-1 are  incorporated  by
reference into this Item 7 of Part II of Form 10-KSB.

Item 8. Change in and Disagreements with Accountants on Accounting and Financial
------- ------------------------------------------------------------------------
        Disclosure
        ----------

         None.


                                    PART III

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

         The Board of Directors of Lawrence  Financial  presently is composed of
six  members who are  elected  for terms of three  years,  one third of whom are
elected annually.  All of the directors of Lawrence Financial are independent of
management,  except  for Mr.  Blair.  Information  regarding  the  directors  is
provided  below.  Unless  otherwise  stated,  each  person has held his  current
occupation for the last five years. Ages presented are as of December 31, 2000.

         The following directors have terms ending in 2001:

         Tracy E. Brammer.  Jr. is Vice  President,  General Manager and Funeral
Director of Tracy Brammer Funeral Home, Inc. Age 56. Director since 1984.

         Jack L.  Blair  joined  Lawrence  Federal  in 1994  as  Executive  Vice
President and Chief  Executive  Officer.  Since 1996, he has served as President
and Chief Executive Officer. Age 53. Director since 2000.

         The following directors have terms ending in 2002:

         Charles E. Austin,  II is a Vice President and General Manager of C. J.
Hughes  Construction  Co., Inc. of Huntington,  West Virginia.  Age 41. Director
since 1996.

         Phillip O. McMahon is a general  dentist in private  practice.  Age 49.
Director since 1993.

         The following directors have terms ending in 2003:

         Herbert J. Karlet is the Senior Vice  President for Finance at Marshall
University,  which is located in  Huntington,  West Virginia.  Age 50.  Director
since 1991.

         Robert N.  Taylor is the owner and  President  of Ohio Big Birds,  Inc.
which raises and processes ostrich meat and leather products,  and the owner and
operator of Taylor Farm, a grain and cattle farm. Age 56. Director since 1995.


                                       41

<PAGE>

Executive Officers

         The executive  officers of Lawrence Federal and Lawrence  Financial are
elected annually by the Board of Directors and serve at the Board's  discretion.
The following sets forth  information  regarding the executive  officers and key
employees of Lawrence Financial and Lawrence Federal who are not also directors.
Unless  otherwise  stated,  each  executive  officer has held his or her current
position for at least the last five years. Ages presented are as of December 31,
2000.

         RobRoy Walters has served as Senior Vice President and Chief  Financial
Officer of Lawrence  Financial and Lawrence Federal since December 2000. For the
twelve years prior to his  appointment,  Mr. Walters was associated with Peoples
Bank NA and Peoples  Bancorp,  Inc. During his tenure with Peoples  Bancorp,  he
served in various capacities including Controller for Peoples Bancorp, Inc., and
President,  Chief Executive  Officer and a director on the Board of Directors of
Peoples Bank,  F.S.B., a wholly owned subsidiary of Peoples Bancorp,  Inc. After
the  merger/formation  of Peoples  Bank NA in March 2000,  he served as the Vice
President and Regional Sales Manager for the Huntington-Ashland-Ironton  market.
Prior to joining Peoples Bancorp,  Inc., Mr. Walters gained  experience  outside
the financial  services  industry by working within Fortune 500 corporations and
smaller regional companies in sales and management. Age 42.

         Mary   C.    Kratzenberg    has   served   as   Vice    President   and
Secretary-Treasurer  of  Lawrence  Federal  since 1996 and has been  employed by
Lawrence  Federal  since  1977.  Ms.  Kratzenberg  is also  Vice  President  and
Secretary-Treasurer of Lawrence Financial. Age 46.

         Mark R. Potter has served as Vice  President of Lawrence  Federal since
1996 and has been employed by Lawrence  Federal since 1990.  Prior to 1996,  Mr.
Potter served as a branch manager and loan officer. Age 39.

         Carey B.  Dunfee has served as  Controller  of Lawrence  Federal  since
joining Lawrence Federal in 1994. Age 32.

Section 16(a) Compliance

         Section  16(a)  of  the  Exchange  Act  requires  Lawrence  Financial's
executive  officers  and  directors,  and  persons  who own more than 10% of any
registered class of Lawrence  Financial's equity securities,  to file reports of
ownership and changes in ownership with the Securities and Exchange  Commission.
Executive officers,  directors and greater than 10% shareholders are required by
regulation to furnish Lawrence  Financial with copies of all Section 16(a) forms
they file.

         Based solely on its review of the copies of such forms it has received,
as provided to Lawrence  Financial  by the  above-referenced  persons,  Lawrence
Financial  believes  that,  during the fiscal year ended  December 31, 2000, all
filing requirements applicable to its reporting officers,  directors and greater
than 10% shareholders were properly and timely complied with.

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

Directors' Compensation

         Lawrence  Financial pays an annual retainer of $7,200 to each member of
its Board of Directors.  Lawrence Federal pays a fee of $1,200 per month to each
of its directors for service on the Board of


                                       42

<PAGE>


Directors of Lawrence  Federal.  Directors  also  receive an annual  retainer of
$1,400 for  serving on the Board of  Directors  of Lawrence  Financial  Services
Corp.

         Lawrence  Federal  maintains a deferred  compensation  arrangement  for
directors  under which each director may elect on an annual basis to defer up to
100% of his monthly Board  remuneration.  Upon the director's  attainment of age
68,  Lawrence  Federal will pay the balance of the director's  deferral  account
either in a lump sum or in  monthly  installments  over a period of 240  months.
Over the deferral  period,  a director's  account is credited with interest with
monthly  compounding.  In the event of a change in control of Lawrence Financial
(as defined in the  program)  followed by a director's  termination  of service,
each director will be entitled to begin to receive his deferral  account and the
interest  rate  will  become  fixed at the time of the  change in  control.  The
arrangement with the directors also provides each director with a death benefit.
If a director dies while in active service with Lawrence Federal, the director's
beneficiary  will  receive  an  annual  payment  in an amount  specified  in the
director's  individual agreement for a period of 20 years.  Lawrence Federal has
acquired life insurance on members of the Board to provide  informal funding for
its  obligations  under the program.  During the fiscal year ended  December 31,
2000, all directors participated in the director deferral program.

         Lawrence  Federal also  maintains a director  emeritus  program for its
non-employee  directors  to  encourage  them to  remain as  directors.  Upon the
director's  attainment  of age 68 and  completion  of 15 years of  service  as a
director,  Lawrence Federal will pay the director $500 annually for each year of
service,  up to 50% the board of fees at the retirement date, for a period of 15
years.  Each  director's  agreement also provides for a reduced  benefit upon an
early  retirement  after the  attainment of age 65, but before the attainment of
age 68, and completion of 15 years of service.  Upon a director's death while in
active  service or in the event of a change in control  of  Lawrence  Federal or
Lawrence  Financial (as defined in the program),  each director will be entitled
to receive a payment  equivalent  to what he would have  received had his normal
retirement  date  coincided  with the date of the  change in  control or date of
death,  as the case may be.  Lawrence  Federal has  acquired  life  insurance on
members  of  the  Board  of  Directors  to  provide  informal  funding  for  its
obligations under the program.

Executive Compensation

         Summary Compensation Table. The following  information is furnished for
Mr. Blair No other executive  officer of Lawrence  Financial or Lawrence Federal
received salary and bonus of $100,000 or more during the year ended December 31,
2000.


                               Annual Compensation
                        ----------------------------------------
 Name and                                          Other Annual     All Other
 Position                Year(1)  Salary(2) Bonus Compensation(3)  Compensation
 --------                -------  --------- ----- ---------------  ------------
Jack L. Blair             2000     $100,600   --       --            $4,492(4)
   President and Chief
   Executive Officer      1999      86,100    --       --             3,650

----------

(1)  Compensation information for the fiscal year ended 1998 has been omitted as
     Lawrence  Financial  was  neither a public  company nor a  subsidiary  of a
     public company at that time.

(2)  Includes board of director fees and board committee fees.

(3)  Does not include the aggregate  amount of  perquisites  and other  personal
     benefits, which was less than $50,000 or 10% of the total annual salary and
     bonus reported.

(4)  Consists of employer  contributions to the 401(k) plan of $4,592.  Employer
     contributions  to the  employee  stock  ownership  plan  have  not yet been
     determined.

                                       43

<PAGE>


         Employment  Agreements.  Effective December 28, 2000,  Lawrence Federal
and Lawrence  Financial has each entered into an employment  agreement  with Mr.
Blair. The employment  agreements provide for a three-year term. The term of the
Lawrence Financial  employment  agreement extends on a daily basis until written
notice of non-renewal is given by the Board of Directors or Mr. Blair.  The term
of the Lawrence  Federal  employment  agreement is renewable on an annual basis.
The employment  agreements provide that Mr. Blair's base salary will be reviewed
annually.  The current base salary under the employment agreements for Mr. Blair
is $98,400.  In addition to the base salary,  the employment  agreements provide
for,  among other things,  participation  in employee  benefits  plans and other
fringe benefits  applicable to executive  personnel.  The employment  agreements
provide for termination by Lawrence Federal or Lawrence  Financial for cause, as
defined  in the  employment  agreements,  at any time.  If  Lawrence  Federal or
Lawrence Financial chooses to terminate Mr. Blair's employment for reasons other
than for cause,  or if Mr.  Blair  resigns  from  Lawrence  Federal or  Lawrence
Financial  after  specified  circumstances  that would  constitute  constructive
termination, Mr. Blair or, if Mr. Blair dies, his beneficiary, would be entitled
to receive an amount equal to the benefit plan base salary,  payments that would
have been paid to Mr. Blair for the remaining term of the  employment  agreement
and the  contributions  that would have been made on Mr.  Blair's  behalf to any
employee  benefit plans during the remaining term of the  employment  agreement.
Lawrence  Federal  and  Lawrence  Financial  would also  continue to pay for Mr.
Blair's  health and welfare  benefit plan coverage for the remaining term of the
employment  agreement Upon termination of Mr. Blair for reasons other than cause
or a change in  control,  Mr.  Blair must  adhere to a one-year  non-competition
agreement.

         Under the employment  agreements,  if, following a change in control of
Lawrence Federal or Lawrence Financial,  Mr. Blair's employment is involuntarily
terminated or if Mr. Blair  voluntarily  terminates his employment in connection
with circumstances  specified in the agreement,  then Mr. Blair or, if Mr. Blair
dies,  his  beneficiary,  would be entitled to a severance  payment equal to the
greater of the payments and benefits that would have been paid for the remaining
term of the agreement or three times the average of Mr.  Blair's five  preceding
taxable  years' annual  compensation.  Lawrence  Federal and Lawrence  Financial
would also  continue  Mr.  Blair's  health and  welfare  benefits  coverage  for
thirty-six  months.  Even  though  both  employment  agreements  provide  for  a
severance  payment if a change in control  occurs,  Mr.  Blair would not receive
duplicate  payments or benefits under the agreements.  Under  applicable law, an
excise tax would be triggered by change in  control-related  payments that equal
or exceed three times Mr.  Blair's  average  annual  compensation  over the five
years  preceding  the change in  control.  The excise tax would equal 20% of the
amount of the payment in excess of one times Mr.  Blair's  average  compensation
over the preceding  five-year  period.  In the event that payments  related to a
change in control of Lawrence Financial are subject to this excise tax, Lawrence
Financial will provide Mr. Blair with an additional  amount sufficient to enable
Mr.  Blair to retain the full value of his change in control  benefits as if the
excise tax had not applied.

         Lawrence Financial  guarantees the payments to Mr. Blair under Lawrence
Federal's  employment  agreement  if they  are not  paid  by  Lawrence  Federal.
Lawrence  Financial will also make all payments due under the Lawrence Financial
employment  agreement.  Lawrence  Federal  or  Lawrence  Financial  will  pay or
reimburse  all  reasonable  costs and legal fees incurred by Mr. Blair under any
dispute or question of interpretation relating to the employment agreements,  if
Mr.  Blair is  successful  on the  merits in a legal  judgment,  arbitration  or
settlement.  The employment  agreements  also provide that Lawrence  Federal and
Lawrence  Financial  will  indemnify  Mr.  Blair to the fullest  extent  legally
allowable for all expenses and  liabilities he may incur in connection  with any
suit or  proceeding  in which he may be  involved by reason of his having been a
director or officer of Lawrence Financial or Lawrence Federal.

         Deferred  Compensation  Agreement.  Lawrence  Federal  entered  into  a
deferred  compensation  agreement  with Mr. Blair under which he may elect on an
annual  basis to defer a portion of his  salary.  Upon  termination  of service,
Lawrence  Federal will pay the balance of Mr. Blair's deferral account in a lump
sum.


                                       44

<PAGE>


Over the deferral  period,  Mr. Blair's account is credited with annual interest
with  monthly  compounding.  In the event of a change  in  control  of  Lawrence
Federal  (as defined in the  program)  followed by Mr.  Blair's  termination  of
service, he will be entitled to receive the balance of his deferral account in a
lump sum. If Mr. Blair dies while in active service with Lawrence  Federal,  his
beneficiary will receive $21,862 annually in monthly  installments for 20 years.
Lawrence  Federal has acquired life  insurance on Mr. Blair to provide  informal
funding for its obligations under the agreement.

         Supplemental  Executive  Retirement Plan.  Lawrence Federal maintains a
supplemental  executive  retirement plan to provide for supplemental  retirement
benefits with respect to the employee  stock  ownership  plan. The plan provides
participating  executives with benefits otherwise limited by other provisions of
the  Internal  Revenue Code or the terms of the employee  stock  ownership  plan
loan.  Specifically,  the plan provides benefits to eligible  individuals (those
designated by the Board of Directors of Lawrence Federal or its affiliates) that
cannot be provided  under the employee  stock  ownership plan as a result of the
limitations  imposed  by the  Internal  Revenue  Code,  but that would have been
provided under the employee stock  ownership plan but for such  limitations.  In
addition to providing for benefits lost under tax-qualified plans as a result of
limitations  imposed by the Internal  Revenue  Code,  the new plan also provides
supplemental benefits to designated  individuals upon a change of control before
the complete  scheduled  repayment of the employee  stock  ownership  plan loan.
Generally,  upon such an event, the supplemental  executive retirement plan will
provide the individual  with a benefit equal to what the  individual  would have
received under the employee stock ownership plan had he or she remained employed
throughout the term of the employee stock  ownership plan loan less the benefits
actually  provided  under the  employee  stock  ownership  plan on behalf of the
individual. An individual's benefits under the supplemental executive retirement
plan will  generally  become  payable  upon the change in  control  of  Lawrence
Federal or Lawrence  Financial.  The Board of Directors has designated Mr. Blair
as a participant in the supplemental executive retirement plan.

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

         The following table provides information as of March 23, 2001 about the
persons known to Lawrence  Financial to be the beneficial owners of more than 5%
of Lawrence Financial's  outstanding common stock. A person may be considered to
beneficially  own any shares of common stock over which he or she has,  directly
or indirectly, sole or shared voting or investing power.


                                          Number of        Percent of Common
Name and Address                         Shares Owned      Stock Outstanding
-------------------                 --------------------  --------------------
Lawrence Federal Savings Bank             62,066(1)               8.0%
Employee Stock Ownership Plan
311 South Fifth Street
Ironton, Ohio 45638

---------
(1)  Includes  55,866  shares  that  have not been  allocated  to  participants'
     accounts  and 6,200 that have been  allocated  to  participants'  accounts.
     Under the terms of the ESOP, the ESOP trustee will vote shares allocated to
     participants' accounts in the manner directed by the participants.  Subject
     to its fiduciary  responsibility,  the trustee will vote unallocated shares
     and allocated shares for which voting  instructions are not timely received
     in the same proportion as shares for which they have received timely voting
     instructions  from  participants.  The trustee of the ESOP is First Bankers
     Trust Company.


                                       45

<PAGE>


Security Ownership of Management

       The following table provides  information as of March 23, 2001, about the
shares  of  Lawrence  Financial  common  stock  that  may  be  considered  to be
beneficially  owned by all  directors  and  executive  officers of the  Lawrence
Financial as a group. Unless otherwise indicated,  each of the named individuals
has sole voting  power and sole  investment  power with respect to the number of
shares shown.


                                                               Percent of
                                             Number of        Common Stock
        Name                               Shares Owned       Outstanding(1)
        ----                               ------------       --------------
Jack L. Blair                                 10,200(2)            1.3%
Charles E. Austin, II                         12,500(3)            1.6
Tracy E. Brammer, Jr.                         12,458(4)            1.6
Herbert J. Karlet                              9,141(5)            1.2
Phillip O. McMahon                            12,500(6)            1.6
Robert N. Taylor                                 7,500               *
All directors and executive officers
 as a group (10 persons)                        68,765             8.9%

--------

*    Does not exceed 1.0% of the Company's voting securities.

(1)  Based on 775,827 shares of Company common stock outstanding and entitled to
     vote as of March 15, 2001.

(2)  Includes  2,500 shares held by Mr.  Blair's  spouse.  Also  includes  2,445
     shares held in trust as part of the  Lawrence  Federal  Savings Bank 401(k)
     Savings Plan over which Mr. Blair has voting power.

(3)  Includes 5,000 shares held by Mr. Austin's spouse.

(4)  Includes 2,103 shares held by Mr. Brammer's spouse.

(5)  Includes 641 shares held by Mr. Karlet's spouse.

(6)  Includes 5,000 shares held by Mr. McMahon's spouse.


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

Transactions with Lawrence Federal

       Federal  regulations  require that all loans or  extensions  of credit to
executive  officers and directors  must generally be made on  substantially  the
same terms, including interest rates and collateral,  as those prevailing at the
time for comparable  transactions with other persons, must not involve more than
the  normal  risk  of  repayment   or  present   other   unfavorable   features.
Notwithstanding  this rule, federal  regulations permit Lawrence Federal to make
loans to executive  officers and directors at reduced interest rates if the loan
is made under a benefit program  generally  available to all other employees and
does not give  preference  to any  executive  officer or director over any other
employee.   Lawrence  Federal  has  adopted  a  policy  of  offering   employees
residential mortgage loans and personal consumer loans with interest rates equal
to Lawrence  Federal's  cost of funds plus 1%,  adjusted  upwards to the nearest
one-quarter  of 1%.  Lawrence  Federal also offers  employees  credit cards with
interest rates equal to the prime rate.

       In addition,  loans made to a director or executive  officer in an amount
that,  when  aggregated with the amount of all other loans to the person and his
or her  related  interests,  are in excess of the  greater  of  $25,000 or 5% of
Lawrence  Federal's  capital and surplus,  up to a maximum of $500,000,  must be
approved in advance by a majority of the  disinterested  members of the Board of
Directors.


                                       46

<PAGE>

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

 (a) Exhibits

     3.1  Certificate of Incorporation of Lawrence Financial Holdings, Inc.(1)

     3.2  Bylaws of Lawrence Financial Holdings, Inc.(1)

     4.0  Specimen Stock Certificate of Lawrence Financial Holdings, Inc.(1)

    10.1  Lawrence Federal Savings Bank Employment Agreement with Jack L. Blair

    10.2  Lawrence Financial Holdings,  Inc.  Employment  Agreement with Jack L.
          Blair

    10.3  Lawrence Federal Savings Bank 401(k) Savings Plan(1)

    10.4  Lawrence Federal Savings Bank Employee Severance Compensation Plan

    10.5  Lawrence Federal Savings Bank Supplemental Executive Retirement Plan

    10.6  Deferred  Compensation  Agreement  dated as of June 25,  1996  between
          Lawrence Federal Savings Bank and Jack L. Blair(1)

    10.7  Form of Deferred Fee Agreement  between  Lawrence Federal Savings Bank
          and individual directors(1)

    10.8  Form of Director  Emeritus  Agreement between Lawrence Federal Savings
          Bank and individual directors(1)

    10.9  Agreement dated December 1, 1992 between Lawrence Federal Savings Bank
          and Lanco Services, Inc.(1)

    21.0  Subsidiary  information is incorporated herein by reference to Part I,
          Item 1, "Description of Business-Subsidiaries."

    23.0  Consent of Crowe, Chizek and Company LLP

----------
(1)  Incorporated   herein  by  reference   from  the  Exhibits  to  Form  SB-2,
     Registration Statement and amendments thereto, initially filed on September
     8, 2000, Registration No. 333-45404.

  (b) Reports on Form 8-K

         None.

                                       47

<PAGE>

                     [CROWE, CHIZEK AND COMPANY LETTERHEAD]


                         REPORT OF INDEPENDENT AUDITORS



Board of Directors
Lawrence Financial Holdings, Inc.
Ironton, Ohio


We have  audited  the  accompanying  consolidated  balance  sheets  of  Lawrence
Financial  Holdings,  Inc.  as of  December  31,  2000  and  1999,  and  related
consolidated   statements   of   income,   comprehensive   income,   changes  in
shareholders'  equity and cash flows for the years then ended.  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
amounts and  disclosures  in the  financial  statements.  An audit also includes
assessing  accounting   principles  used  and  significant   estimates  made  by
management,  as well as evaluating overall financial statement presentation.  We
believe our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Lawrence Financial  Holdings,
Inc. as of December 31, 2000 and 1999,  and results of its  operations  and cash
flows for the years then ended in conformity with generally accepted  accounting
principles.




                                         /s/Crowe, Chizek and Company LLP

Columbus, Ohio
February 23, 2001

                                      F-1

<PAGE>


                        LAWRENCE FINANCIAL HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 1999

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                   2000                   1999
                                                                                   ----                   ----
<S>                                                                          <C>                  <C>
ASSETS
     Cash and due from banks                                                 $       2,206,856    $       4,156,623
     Merrill Lynch money market fund                                                 2,678,223              511,009
                                                                             -----------------    -----------------
         Total cash and cash equivalents                                             4,885,079            4,667,632
     Securities available for sale, at fair value                                    6,430,911           12,241,175
     Loans receivable - net                                                        105,385,397           78,781,060
     Federal Home Loan Bank stock                                                      549,100              510,800
     Premises and equipment, net                                                     3,453,094            3,538,021
     Accrued interest receivable                                                       815,816              684,882
     Cash surrender value of life insurance                                          1,870,231            1,822,853
     Other assets                                                                      455,590              705,964
                                                                             -----------------    -----------------

                                                                             $     123,845,218    $     102,952,387
                                                                             =================    =================


LIABILITIES AND SHAREHOLDERS' EQUITY
     Liabilities
         Noninterest-bearing deposits                                        $       1,409,413    $       1,308,795
         Interest-bearing deposits                                                 101,697,172           88,990,477
                                                                             -----------------    -----------------
              Total deposits                                                       103,106,585           90,299,272
         Federal Home Loan Bank borrowings                                           5,000,000            4,500,000
         Other liabilities                                                             798,688              361,602
                                                                             -----------------    -----------------
              Total liabilities                                                    108,905,273           95,160,874

     Shareholders' Equity
         Common stock; par value $0.01 per share; shares
           Authorized:  854,625; shares issued:  775,827 in 2000                         7,696                   --
         Additional paid-in capital                                                  6,994,305                   --
         Retained earnings - substantially restricted                                8,555,006            8,132,702
         Unearned ESOP shares (unearned shares:  55,866
           in 2000)                                                                   (558,660)                  --
         Accumulated other comprehensive loss, net of tax
           of $(30,086) in 2000 and $(175,764) in 1999                                 (58,402)            (341,189)
                                                                             -----------------    -----------------
              Total shareholders' equity                                            14,939,945            7,791,513
                                                                             -----------------    -----------------

                  Total liabilities and shareholders' equity                 $     123,845,218    $     102,952,387
                                                                             =================    =================
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-2

<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                     Years ended December 31, 2000 and 1999

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                       2000               1999
                                                                                       ----               ----
<S>                                                                               <C>               <C>
Interest income
     Loans, including fees                                                        $    7,492,361    $     6,002,492
     Taxable securities                                                                  703,318            802,379
     Overnight deposits                                                                   40,840            142,775
                                                                                  --------------    ---------------
                                                                                       8,236,519          6,947,646

Interest expense
     Deposits                                                                          4,584,344          4,022,375
     Federal Home Loan Bank borrowings                                                   346,051             35,707
                                                                                  --------------    ---------------
                                                                                       4,930,395          4,058,082
                                                                                  --------------    ---------------

Net interest income                                                                    3,306,124          2,889,564

Provision for loan losses                                                                295,000            120,000
                                                                                  --------------    ---------------

Net interest income after provision for loan losses                                    3,011,124          2,769,564

Noninterest income
     Net securities (losses) gains                                                      (156,828)             1,735
     Service charges                                                                     374,697            287,612
     Other                                                                               148,808            136,528
                                                                                  --------------    ---------------
                                                                                         366,677            425,875

Noninterest expense
     Salaries and benefits                                                             1,228,798          1,021,321
     Deposit insurance premiums                                                           19,196             52,248
     Occupancy and equipment                                                             351,124            313,086
     Data processing                                                                     428,603            358,085
     Franchise tax                                                                        91,139            106,206
     Loss on disposal of premises and equipment                                               --              7,336
     Advertising expense                                                                  99,303             96,810
     Other                                                                               564,972            447,384
                                                                                  --------------    ---------------
                                                                                       2,783,135          2,402,476
                                                                                  --------------    ---------------

Income before income tax                                                                 594,666            792,963

Provision for income tax                                                                 172,362            249,694
                                                                                  --------------    ---------------

Net income                                                                        $      422,304    $       543,269
                                                                                  ==============    ===============

Basic and diluted earnings per common share
  subsequent to conversion                                                        $       (0.08)           N/A
                                                                                  =============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     Years ended December 31, 2000 and 1999

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                           2000            1999
                                                                                           ----            ----

<S>                                                                                   <C>              <C>
Net income                                                                            $    422,304     $    543,269
Other comprehensive income:
     Unrealized gains (losses) arising during period                                       271,637         (555,633)
     Reclassification adjustment for (gains) losses
       included in net income                                                              156,828           (1,735)
                                                                                      ------------     ------------
                                                                                           428,465         (557,368)
     Income tax benefit (expense)                                                         (145,678)         189,505
                                                                                      ------------     ------------
         Other comprehensive income (loss), net of tax                                     282,787         (367,863)
                                                                                      ------------     ------------

Comprehensive income                                                                  $    705,091     $    175,406
                                                                                      ============     ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-4

<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Years ended December 31, 2000 and 1999

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                            Accumulated
                                                               Additional                      Unearned        Other
                                                 Common          Paid-In        Retained         ESOP      Comprehensive
                                                  Stock          Capital        Earnings        Shares        Income         Total
                                                  -----          -------        --------        ------        ------         -----
<S>                                              <C>          <C>            <C>             <C>           <C>          <C>
Balance - January 1, 1999                        $    --      $      --      $  7,589,433    $     --      $  26,674    $ 7,616,107


Net income                                            --             --           543,269          --           --          543,269

Net unrealized depreciation on securities
  available for sale, net of tax of $(189,505)        --             --              --            --       (367,863)      (367,863)
                                                 ---------    -----------    ------------    ----------    ---------    -----------

Balance - December 31, 1999                           --             --         8,132,702          --       (341,189)     7,791,513

Net income                                            --             --           422,304          --           --          422,304

Net unrealized appreciation on securities
  available for sale, net of tax of $145,678          --             --              --            --        282,787        282,787

Proceeds from the sale of 775,827 shares of
  common stock, net of conversion costs              7,758      7,056,243            --            --           --        7,064,001

Purchase of 62,066 shares of common stock
  for ESOP                                            --             --              --        (620,660)        --         (620,660)

6,200 shares committed to be released under
  the ESOP subject to repurchase obligation            (62)       (61,938)           --          62,000         --             --
                                                 ---------    -----------    ------------    ----------    ---------    -----------

                                                 $   7,696    $ 6,994,305    $  8,555,006    $ (558,660)   $ (58,402)   $14,939,945
                                                 =========    ===========    ============    ==========    =========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-5

<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2000 and 1999

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                       2000               1999
                                                                                       ----               ----
<S>                                                                              <C>                <C>
Cash flows from operating activities
     Net income                                                                  $       422,304    $       543,269
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation                                                                    197,191            197,123
         Provision for loan losses                                                       295,000            120,000
         Stock dividend on Federal Home Loan Bank stock                                  (38,300)           (34,100)
         Premium amortization                                                             12,856             23,037
         Net securities (gains) losses                                                   156,828             (1,735)
         Loss on disposition of premises and equipment                                        --              7,336
         Deferred tax benefit                                                            (69,921)           (30,050)
         ESOP expense                                                                     68,200                 --
         Change in other assets and liabilities                                          365,191           (584,741)
                                                                                 ---------------    ---------------
              Net cash from operating activities                                       1,409,349            240,139
                                                                                 ---------------    ---------------

Cash flows from investing activities
     Purchase of:
         Securities available for sale                                                (2,050,000)        (2,183,195)
         Federal Home Loan Bank stock                                                         --            (14,900)
         Premises and equipment                                                         (112,264)          (219,067)
     Proceeds from:
         Sale of securities available for sale                                         8,119,045          1,124,671
         Calls, maturities and principal repayments of securities
           available for sale                                                                 --          1,001,735
     Net change in loans                                                             (26,899,337)        (8,133,108)
                                                                                 ---------------    ---------------
              Net cash from investing activities                                     (20,942,556)        (8,423,864)

Cash flows from financing activities
     Net change in:
         Deposits                                                                     12,807,313          1,807,427
         Federal Home Loan Bank short-term borrowings                                 (1,500,000)         4,500,000
     Proceeds from Federal Home Loan Bank long-term borrowings                         2,000,000                 --
     Proceeds from issuance of common stock, net of
       conversion costs                                                                7,064,001                 --
     Cash provided to ESOP to acquire common stock                                      (620,660)                --
                                                                                 ---------------    ---------------
              Net cash from financing activities                                      19,750,654          6,307,427
                                                                                 ---------------    ---------------

Net change in cash and cash equivalents                                                  217,447         (1,876,298)

Cash and cash equivalents at beginning of year                                         4,667,632          6,543,930
                                                                                 ---------------    ---------------

Cash and cash equivalents at end of year                                         $     4,885,079    $     4,667,632
                                                                                 ===============    ===============

Supplemental disclosures:
     Cash paid during the year for:
         Interest                                                                $     4,913,583    $     4,055,000
         Income taxes                                                                    173,000            231,000
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-6
<PAGE>


                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of  Consolidation:  The  consolidated  financial  statements  include
-----------------------------
Lawrence  Financial  Holdings,  Inc. and its wholly-owned  subsidiary,  Lawrence
Federal  Savings  Bank (the  "Bank")  and the  Bank's  wholly-owned  subsidiary,
Lawrence Financial Services Corporation (together, the "Company").  Intercompany
transactions and balances are eliminated in consolidation.

Nature of  Operations:  The  Company  provides  financial  services  through its
----------------------
offices in Lawrence County. Its primary deposit products are checking,  savings,
and term certificate accounts,  and its primary lending products are real estate
mortgage and installment loans.  Substantially all loans are secured by specific
items  of  collateral  including  consumer  assets  and  real  estate.  Lawrence
Financial  Services  Corporation  holds real property for  investment  purposes.
Management considers the Company to operate in one segment, banking.

Use of Estimates:  To prepare financial  statements in conformity with generally
-----------------
accepted accounting principles, management makes estimates and assumptions based
on available  information.  These estimates and  assumptions  affect the amounts
reported in the financial  statements and the disclosures  provided,  and future
results  could differ.  The allowance for loan losses,  fair values of financial
instruments and status of contingencies are particularly subject to change.

Cash Flows:  Cash and cash  equivalents  include cash on hand and deposits  with
-----------
other financial  institutions  with original  maturities of 90 days or less. Net
cash flows are reported for loan and deposit transactions.

Securities:  Securities  are  classified  as available for sale as they might be
-----------
sold before maturity.  Securities  available for sale are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive income.
Other  securities  such as  Federal  Home Loan Bank  stock are  carried at cost.
Securities  are  written  down to fair value when a decline in fair value is not
temporary.  Gains and  losses on sales  are based on the  amortized  cost of the
security  sold.  Interest  and  dividend  income,  adjusted by  amortization  of
purchase premium or discount using the interest method, is included in earnings.

Loans:  Loans are reported at  principal  balance  outstanding,  net of unearned
------
interest,  deferred  loan fees and  costs,  and an  allowance  for loan  losses.
Interest income is reported on the interest method and includes  amortization of
net deferred loan fees and costs over contractual life of the loan.

                                       F-7
<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest on real estate and certain  consumer  loans is accrued over the term of
the loans based on the principal balance outstanding. Where serious doubt exists
as to the collectibility of a loan, the accrual of interest is discontinued. The
carrying  values of impaired  loans are  periodically  adjusted to reflect  cash
payments,  revised  estimates of future cash flows and  increases in the present
value  of  expected  cash  flows  due to the  passage  of  time.  Cash  payments
representing  interest  income are  reported as such.  Other cash  payments  are
reported as reductions in carrying  value,  while  increases or decreases due to
changes  in  estimates  of future  payments  and due to the  passage of time are
reported as adjustments to the allowance for loan losses.  If these  adjustments
cause the allowance for loan losses to require  adjustment,  such  adjustment is
reported as an adjustment to the provision for loan losses.

Allowance  for Loan  Losses:  Because  some loans may not be repaid in full,  an
----------------------------
allowance  for loan losses is  maintained.  The  allowance  for loan losses is a
valuation allowance, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss  experience,  known risks in the portfolio,  information
about specific borrower  situations and estimated  collateral  values,  economic
conditions  and other  factors.  Allocations  of the  allowance  may be made for
specific  loans,  but the entire  allowance is available  for any loan that,  in
management's judgment, should be charged-off.

Loan  impairment  is  reported  when full  payment  under the loan  terms is not
expected.  Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage,  consumer, and credit card loans, and on an
individual loan basis for other loans.  If a loan is impaired,  a portion of the
allowance is allocated so that the loan is reported,  net, at the present  value
of  estimated  future cash flows using the loan's  existing  rate or at the fair
value of collateral if repayment is expected solely from the  collateral.  Loans
are evaluated  for  impairment  when payments are delayed,  typically 90 days or
more, or when it is probable that not all principal and interest amounts will be
collected  according to the original  terms of the loan.  While the factors that
identify a credit for  consideration for measurement of impairment or nonaccrual
are similar,  the  measurement  considerations  differ.  A loan is impaired when
management  believes  it is  probable  that they will be unable to  collect  all
amounts due according to the contractual terms of the loan agreement.  A loan is
placed on  nonaccrual  when  payments  are more than 90 days past due unless the
loan is adequately collateralized and in the process of collection.

Premises and  Equipment:  Land is carried at cost.  Premises and  equipment  are
------------------------
stated at cost less accumulated depreciation. Depreciation is computed using the
straight-line  method over the asset useful lives of the respective premises and
equipment, which are primarily 30 to 50 years for premises and 5 to 10 years for
furniture,  fixtures  and  equipment.  Maintenance  and  repairs  are charged to
expense as incurred and improvements  that extent the useful lives of assets are
capitalized.

                                      F-8
<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Real Estate Owned: Real estate  properties  acquired in collection of a loan are
------------------
recorded  at the lower of cost,  which is the unpaid  balance  plus  foreclosure
costs  or fair  value at  acquisition.  Any  reduction  to fair  value  from the
carrying  value of the  related  loan is  accounted  for as a loan  loss.  After
acquisition,  a valuation  allowance reduces the reported amount to the lower of
the initial amount or fair value less costs to sell. Expenses,  gains and losses
on  disposition,  and changes in the  valuation  allowance are reported in other
expenses.

Income Taxes:  Income tax expense is the sum of the current-year  income tax due
-------------
or refundable  and the change in deferred tax assets and  liabilities.  Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences   between  the  carrying   amounts  and  tax  bases  of  assets  and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.

Long-Term Assets: Premises and equipment and other long-term assets are reviewed
-----------------
for impairment  when events  indicate its carrying amount may not be recoverable
from future  undiscounted  cash flows.  If impaired,  the assets are recorded at
discounted amounts.

Employee  Stock  Ownership  Plan: The cost of shares issued to the ESOP, but not
---------------------------------
yet allocated to participants,  is shown as a reduction of shareholders' equity.
Compensation  expense  is  based  on the  market  price  of  shares  as they are
committed to be released to  participant  accounts.  Participants  may put their
ESOP shares to Company upon termination,  and an amount of equity equal to these
shares times current market price is reclassified out of shareholders' equity.

Earnings Per Common Share: Basic earnings per common share is net income divided
--------------------------
by the weighted average number of common shares  outstanding  during the period.
ESOP shares are considered  outstanding for this  calculation  unless  unearned.
Diluted  earnings per common share  includes the dilutive  effect of  additional
potential common shares issuable.  At December 31, 2000 there were no additional
potential common shares issuable.  Earnings and dividends per share are restated
for all stock splits and  dividends  through the date of issue of the  financial
statements.

Comprehensive  Income:  Comprehensive  income  consists  of net income and other
----------------------
comprehensive  income.  Other comprehensive income includes unrealized gains and
losses on securities available for sale, which are also recognized as a separate
component of equity.

Reclassification: Some items in the prior consolidated financial statements have
-----------------
been reclassified to conform to current presentation.

                                      F-9

<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

New  Accounting  Pronouncements:  Beginning  January 1, 2001,  a new  accounting
--------------------------------
standard  will  require all  derivatives  to be  recorded at fair value.  Unless
designated  as hedges,  changes in these fair  values  will be  recorded  in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting  gains and losses on the hedge and on the hedged item, even if the
fair  value of the  hedged  item is not  otherwise  recorded.  Adoption  of this
standard  on  January 1, 2001 did not have a  material  effect on the  financial
statements of the Company.


NOTE 2 - SECURITIES

The amortized  cost and fair value of securities  available for sale at year-end
are as follows.
<TABLE>
<CAPTION>

                                             Amortized        Unrealized         Unrealized             Fair
                                               Cost              Gains             Losses               Value
                                               ----              -----             ------               -----
<S>                                     <C>                 <C>               <C>                <C>
     2000:
     U.S. Government agencies           $     5,506,174     $        9,491    $       (43,509)   $     5,472,156
     Trust preferred securities               1,013,225                 --            (54,470)           958,755
                                        ---------------     --------------    ---------------    ---------------

                                        $     6,519,399     $        9,491    $       (97,979)   $     6,430,911
                                        ===============     ==============    ===============    ===============

     1999:
     U.S. Treasury securities           $       681,537     $           --    $       (12,335)   $       669,202
     U.S. Government agencies                11,057,353                 --           (301,005)        10,756,348
     Trust preferred securities               1,019,238                 --           (203,613)           815,625
                                        ---------------     --------------    ---------------    ---------------

                                        $    12,758,128     $           --    $      (516,953)   $    12,241,175
                                        ===============     ==============    ===============    ===============
</TABLE>

Contractual   maturities  of  securities  at  year-end  2000  were  as  follows.
Securities not due at a single maturity date are shown separately.

                                                  Amortized            Fair
                                                    Cost               Value
                                                    ----               -----
         Due from one to five years          $     5,506,174     $     5,472,156
         Due after ten years                       1,013,225             958,755
                                             ---------------     ---------------
                                             $     6,519,399     $     6,430,911
                                             ===============     ===============

Proceeds from sales of securities  were  $8,119,045  and $1,124,671 for 2000 and
1999.  Gross losses of $156,828 were  recognized  on those sales in 2000.  Gross
gains of $1,735 were recognized on those sales in 1999.

Securities with amortized cost of $1,187,280 and $8,623,897 at December 31, 2000
and 1999 were pledged to secure public deposits.

                                      F-10
<PAGE>
                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are as follows:
<TABLE>
<CAPTION>
                                                                                December 31,
                                                                                ------------
                                                                        2000                    1999
                                                                        ----                    ----
<S>                                                               <C>                     <C>
         1-4 family residential
           mortgage loans                                         $     51,297,505        $     51,605,945
         Other real estate loans                                         9,760,182               6,433,269
         Automobile loans                                               17,203,767               2,267,644
         Mobile home loans                                              15,803,756              11,758,743
         Other                                                           8,969,737               5,406,232
                                                                  ----------------        ----------------
                                                                       103,034,947              77,471,833
         Net deferred loan origination
           costs                                                         3,125,080               1,897,952
         Allowance for loan losses                                        (774,630)               (588,725)
                                                                  ----------------        ----------------
              Total                                               $    105,385,397        $     78,781,060
                                                                  ================        ================
</TABLE>

Activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                          ------------------------
                                                                        2000                    1999
                                                                        ----                    ----
<S>                                                               <C>                     <C>
         Beginning balance                                        $        588,725        $        535,834
         Provision for loan losses                                         295,000                 120,000
         Charge-offs                                                      (119,084)               (137,234)
         Recoveries                                                          9,989                  70,125
                                                                  ----------------        ----------------
         Ending balance                                           $        774,630        $        588,725
                                                                  ================        ================
</TABLE>

Impaired loans for the years ended December 31, 2000 and 1999 were not material.

In the  normal  course  of  business,  the  Company  has made  loans to  certain
directors,  executive  officers and their associates under terms consistent with
the  Company's  general  lending  policies.  Loan  activity  relating  to  these
individuals for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
                                                                                   2000            1999
                                                                                   ----            ----
<S>                                                                          <C>              <C>
         Beginning balance                                                   $    708,313     $    657,747
         New loans                                                                213,200          178,402
         Repayments                                                              (161,897)        (127,836)
         Other changes                                                           (267,224)              --
                                                                             ------------     ------------
         Ending balance                                                      $    492,392     $    708,313
                                                                             ============     ============
</TABLE>

Other  changes  represent  loans  applicable  to one  reporting  period that are
excludable  from the other reporting  period,  including a change of individuals
considered to be executive officers.

                                      F-11
<PAGE>
                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 4 - ACCRUED INTEREST RECEIVABLE

Accrued interest consists of the following:

                                                  December 31,
                                                  ------------
                                             2000           1999
                                             ----           ----

         Loans                          $    698,062     $    513,306
         Securities                          117,754          171,576
                                        ------------     ------------

                                        $    815,816     $    684,882
                                        ============     ============


NOTE 5 - PREMISES AND EQUIPMENT

Office properties and equipment consisted of the following:

                                                        December 31,
                                                        ------------
                                                   2000              1999
                                                   ----              ----

        Land                                  $    1,059,002    $       999,605
        Buildings and improvements                 3,347,891          3,324,551
        Furniture and equipment                    1,197,213          1,171,836
        Automobile                                    17,288             13,138
                                              --------------     --------------
             Total cost                            5,621,394          5,509,130
        Accumulated depreciation                  (2,168,300)        (1,971,109)
                                              --------------     --------------

                                              $    3,453,094     $    3,538,021
                                              ==============     ==============


NOTE 6 - DEPOSITS

Certificates of deposit of greater than $100,000 were $11,242,314 and $9,255,977
at December 31, 2000 and 1999.  Deposits greater than $100,000 are not federally
insured.

In lieu of  pledging  securities  as  collateral,  the  Company  purchased  Ohio
Depository Bonds for a cost of $15,000 to secure public deposits.

                                      F-12

<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 6 - DEPOSITS (Continued)

Maturities  of  certificates  of deposits  for the  following  five years are as
follows:

                                                         December 31,
                                                             2000
                                                             ----

                  2001                                  $    55,682,037
                  2002                                        7,830,423
                  2003                                        5,004,517
                  2004                                        1,078,117
                  2005                                          879,012
                  Thereafter                                  1,616,876
                                                        ---------------

                                                        $    72,090,982
                                                        ===============

Interest expense related to deposits is as follows:

                                                        Years
                                                  Ended December 31,
                                                  ------------------
                                                 2000           1999
                                                 ----           ----
                                                   (in thousands)
         Passbook accounts                   $       510     $      534
         Money market and NOW
           Accounts                                  281            254
         Certificates of deposit                   3,793          3,234
                                             -----------     ----------

                                             $     4,584     $    4,022
                                             ===========     ==========


NOTE 7 - FEDERAL HOME LOAN BANK BORROWINGS

At December 31, 2000,  the Company had $5,000,000 in FHLB  borrowings,  of which
$3,000,000  had a fixed interest rate of 6.75% with various  maturities  between
February 13, 2001 and March 21, 2001,  and  $2,000,000 had a fixed interest rate
of 5.91% with a maturity of December 27, 2002. At December 31, 1999, the Company
had FHLB borrowings of $4,500,000.  These borrowings all had an interest rate of
4.75%,  with various  maturities from February 11, 2000 to March 27, 2000. These
borrowings were  collateralized by the Company's FHLB stock owned and $6,750,000
of qualifying mortgage loans.

                                      F-13


<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 8 - COMMITMENTS, CONTINGENCIES AND FINANCIAL
  INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

Some financial instruments are used to meet customer-financing  needs, including
commitments  to make  loans.  These  involve,  to  varying  degrees,  credit and
interest-rate  risks more than the amount reported in the  consolidated  balance
sheet.

Commitments to extend credit:

                                                    December 31,
                                                    ------------
                                            2000                   1999
                                            ----                   ----

     Fixed rate                        $    3,137,840         $      704,591
     Variable rate                          1,218,896              1,671,298
                                       --------------         --------------
                                       $    4,356,736         $    2,375,889
                                       ==============         ==============

     Range of interest rates on
       commitments                     7.25% to 18.00%        6.75% to 18.00%

Commitments  to make loans are agreements to lend to a customer as long as there
is no violation of any condition  established in the  commitment,  and generally
have fixed expiration dates. Exposure to credit loss if the other party does not
perform is represented by the contractual  amount of these items.  Collateral or
other security is normally not obtained for these financial  instruments  before
their use,  and many of the  commitments  are expected to expire  without  being
used.


NOTE 9 - EMPLOYEE BENEFITS

Retirement  Plan: The Company sponsors a 401(k) profit sharing plan for eligible
-----------------
employees.  Under the plan,  employees  who are at least 21 1/2 years of age and
have  completed six months of service are eligible to  participate.  The Company
matches  each   employee's   contribution  at  a  rate  of  100%  of  employees'
contributions up to 5% of gross compensation. Participants become 100% vested as
to the Company's  contributions after three years of service.  Contributions and
expense  for the years ended  December  31,  2000 and 1999  totaled  $27,126 and
$25,346.

Employee  Stock Option Plan:  Employees  participate in an Employee Stock Option
----------------------------
Plan (ESOP).  On December 29, 2000, the ESOP borrowed  $620,660 from the Company
to purchase  62,066  shares of common stock at $10 per share.  The Company makes
discretionary  contributions to the ESOP, and the ESOP uses funds it receives to
repay the loan.  ESOP shares are  allocated  to  participants  based on relative
compensation and expense is recorded.

                                      F-14

<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 9 - EMPLOYEE BENEFITS  (Continued)

Participants  receive the shares at the end of  employment.  For  companies  not
listed on an established exchange, ERISA rules require employers with an ESOP to
agree to repurchase  shares from participants for a certain period following the
distribution of shares to the participants. This rule applies to the Company.

Contributions  to the  ESOP  during  2000  were  $89,787.  Expense  for 2000 was
$68,200.

Shares held by the ESOP at December 31, 2000 were as follows:

         Allocated to participants                                     6,200
         Unearned                                                     55,866
                                                                ------------

              Total ESOP shares                                       62,066
                                                                ============

              Fair value of unearned shares                     $    614,526
                                                                ============

              Fair value of shares subject to repurchase
                obligation                                      $     68,200
                                                                ============

Deferred Compensation Plan: The Bank makes payments to retired directors under a
---------------------------
plan approved by the Board of Directors.  Outside  directors who currently serve
on the Board are also  eligible  for  payments  under  deferred fee and director
emeritus retirement plans approved by the Board of Directors upon retirement. In
addition,  there  is an  incentive  retirement  plan in  place  for the  current
President and CEO. Expenses related to the plans amounted to $36,115 and $31,374
for the years ended December 31, 2000 and 1999.


NOTE 10 - INCOME TAXES

An analysis of the provision for income tax is as follows:

                                                  December 31,
                                         -----------------------------
                                              2000             1999
                                              ----             ----

         Current                         $    242,283     $    279,744
         Deferred                             (69,921)         (30,050)
                                         ------------     ------------

                                         $    172,362     $    249,694
                                         ============     ============


                                      F-15
<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 10 - INCOME TAXES  (Continued)

The sources of gross deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                             -----------------------------
                                                                                   2000            1999
                                                                                   ----            ----
<S>                                                                          <C>              <C>
         Total deferred tax assets
             Allowance for loan losses                                       $    234,145     $    161,194
             Deferred compensation                                                101,795           87,444
             Net unrealized loss on securities
               available for sale                                                  30,086          175,764

         Total deferred tax liabilities
             FHLB stock dividends                                                (105,936)         (92,914)
             Deferred loan fees/cost                                              (37,117)         (33,907)
             Depreciation                                                         (18,168)         (17,019)
                                                                             ------------     ------------

                Net deferred tax asset                                       $    204,805     $    280,562
                                                                             ============     ============
</TABLE>

The bank has  sufficient  taxes  paid in  current  and  prior  years to  warrant
recording the full deferred tax asset without a valuation allowance.

Total federal income tax expense differs from the expected  amounts  computed by
applying  the  statutory  federal tax rate of 34% to income  before  taxes.  The
reasons for this difference are as follows:
<TABLE>
<CAPTION>

                                                                 Years Ended December 31,
                                                   -------------------------------------------------------
                                                              2000                          1999
                                                   -----------------------       -------------------------
                                                        Amount        Rate           Amount        Rate
                                                        ------        ----           ------        ----
<S>                                                <C>                <C>        <C>               <C>
         Tax expense at statutory rate             $    202,661       34.0%      $    269,607      34.0%
         Net earnings of insurance
           contracts                                    (16,109)      (2.7)           (14,327)     (1.8)
         Tax-exempt interest income                     (10,201)      (1.7)            (4,423)     (0.6)
         Other                                           (3,989)      (0.6)            (1,163)     (0.1)
                                                   ------------    -------       ------------    ------
              Tax expense at effective rate        $    172,362       29.0%      $    249,694      31.5%
                                                   ============    =======       ============    ======
</TABLE>

Retained  earnings at December  31, 2000 and 1999  include  $1,493,442  for both
years for which no provision  for federal  income  taxes has been made.  If this
portion of retained earnings is used in the future for any purpose other than to
absorb bad debts,  the amount used will be added to future taxable  income.  The
unrecorded  deferred tax  liability on the above amount at December 31, 2000 and
1999 was $507,770 for both years.

                                      F-16
<PAGE>
                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 11 - REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to various regulatory capital  requirements  administered by
federal regulatory  agencies.  Failure to meet minimum capital  requirements can
initiate  certain  mandatory  actions that, if  undertaken,  could have a direct
material  affect on the Bank's  financial  statements.  Under  capital  adequacy
guidelines and regulatory framework for prompt-corrective  action, the Bank must
meet specific capital guidelines involving  quantitative  measures of the Bank's
assets,  liabilities  and certain  off-balance-sheet  items as calculated  under
regulatory accounting practices.  The Bank's capital amounts and classifications
are also  subject  to  qualitative  judgments  by  regulators  about the  Bank's
components,  risk  weightings and other factors.  At December 31, 2000 and 1999,
management believes the Bank complies with all regulatory capital  requirements.
Based on the Bank's computed  regulatory capital ratios, the Bank was considered
well capitalized under Section 38 of the Federal Deposit Insurance Act as of its
last regulatory exam.  Management is unaware of any events or circumstances that
would change the Bank's classification since that time.

The following is a reconciliation of the Bank's equity under generally  accepted
accounting principles (GAAP) to regulatory capital:

                                                             December 31,
                                                             ------------
                                                         2000           1999
                                                         ----           ----
                                                            (in thousands)

         GAAP equity                                 $   12,938     $     7,792
         Unrealized loss on securities
           available for sale                                58             341
                                                     ----------     -----------
              Tier I capital                             12,996           8,133
         General regulatory loan loss reserves              775             589
                                                     ----------     -----------

                  Total regulatory capital           $   13,771     $     8,722
                                                     ==========     ===========

                                      F-17
<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 11 - REGULATORY CAPITAL REQUIREMENTS (Continued)

The Bank's actual capital levels and minimum required levels were as follows:
<TABLE>
<CAPTION>
                                                                                                     Minimum
                                                                                                 Required to be
                                                                 Minimum Required            Well Capitalized Under
                                                                    for Capital                 Prompt Corrective
                                            Actual               Adequacy Purposes             Action Regulations
                                            ------               -----------------             ------------------
(dollars in thousands)              Amount        Ratio       Amount          Ratio           Amount        Ratio
                                    ------        -----       ------          -----           ------        -----
<S>                              <C>              <C>       <C>                <C>        <C>               <C>
December 31, 2000:
----------------
Total capital (to risk-
  weighted assets)               $   13,771       15.32%    $    7,190         8.0%       $     8,988       10.0%
Tier 1 (core) capital (to
  risk-weighted assets)          $   12,996       14.46%    $    3,595         4.0%       $     5,393        6.0%
Tier 1 (core) capital (to
  adjusted total assets)         $   12,996       10.44%    $    4,981         4.0%       $     6,226        5.0%

December 31,1999:
----------------
Total capital (to risk-
  weighted assets)               $    8,722       11.96%    $    5,835         8.0%       $     7,294       10.0%
Tier 1 (core) capital (to
  risk-weighted assets)          $    8,133       11.15%    $    2,917         4.0%       $     4,376        6.0%
Tier 1 (core) capital (to
  adjusted total assets)         $    8,133        7.83%    $    4,156         4.0%       $     5,195        5.0%
</TABLE>

Regulations of the Office of Thrift  Supervision  (OTS) limit the amount of cash
dividends,  repurchase of common stock and other capital  distributions that may
be paid by a bank without prior approval of the OTS. The regulatory  restriction
provides that the Bank may make a capital distribution without notifying the OTS
or applying to the OTS for  approval  provided  that (1) the total amount of all
capital at the institution (including the proposed capital distribution) for the
applicable  calendar year does not exceed the  institution's net income for that
year to date plus the  institution's  retained net income for the  preceding two
years;  (2) the  institution  will be well  capitalized  following  the proposed
capital distributions; and, (3) certain other conditions are met.

In addition to the restriction  described above, the Bank may not declare or pay
cash  dividends  or  repurchase  any of its shares of common stock if the effect
thereof  would  reduce the Bank's  capital  level  below the  aggregate  balance
required for the liquidation account (as described in Note 14).

                                      F-18


<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS

The  following  table shows the estimated  fair values and the related  carrying
values of the  Company's  financial  instruments  at December 31, 2000 and 1999.
Items that are not financial instruments are not included.
<TABLE>
<CAPTION>
                                                         2000                                1999
                                                         ----                                ----
                                              Carrying             Fair            Carrying            Fair
                                               Value               Value             Value             Value
                                               -----               -----             -----             -----
<S>                                      <C>                <C>               <C>               <C>
    Financial assets
       Cash and cash equivalents         $     4,885,079    $     4,885,000   $     4,667,632   $    4,668,000
       Securities available for sale           6,430,911          6,431,000        12,241,175       12,241,000
       Loans, net                            105,385,397        105,356,000        78,781,060       78,544,000
       Federal Home Loan Bank
         stock                                   549,100            549,000           510,800          511,000
       Accrued interest receivable               815,816            816,000           684,882          685,000
    Financial liabilities
       Deposits                             (103,106,585)      (103,394,000)      (90,299,272)     (90,506,000)
       Federal Home Loan Bank
         advances                             (5,000,000)        (5,000,000)       (4,500,000)      (4,500,000)
       Accrued interest payable                  (41,505)           (42,000)          (16,468)         (16,000)
</TABLE>

For  purposes  of the  above  disclosures  of  estimated  fair  values,  certain
assumptions were used. The carrying value for cash and cash equivalents, accrued
interest  receivable,  Federal Home Loan Bank stock and accrued interest payable
are  considered  to  approximate  fair  value.  The  estimated  fair  value  for
securities  available  for  sale  is  based  on  quoted  market  values  for the
individual securities or for equivalent securities. The estimated fair value for
loans is based on  estimates  of the  difference  in interest  rates the Company
would charge the borrowers for similar such loans with similar  maturities  made
at December 31, 2000 and 1999,  applied for an  estimated  time period until the
loan is assumed to reprice or to be paid.

The  estimated  fair  value  for  demand  deposits,  savings  deposits  and  the
variable-rate  line of  credit  from  Federal  Home  Loan Bank is based on their
carrying  value.  The  estimated  fair value for time  deposits  and  fixed-rate
advances  from Federal Home Loan Bank is based on estimates of the rate the Bank
would pay on such deposits or borrowings at December 31, 2000 and 1999,  applied
for the time period until maturity. The estimated fair value for other financial
instruments and off-balance-sheet loan commitments  approximate cost at December
31, 2000 and 1999 and are not considered significant to this presentation.

While these  estimates of fair value are based on  management's  judgment of the
most appropriate  factors,  there is no assurance that, were the Company to have
disposed of such items at December 31, 2000 and 1999,  the estimated fair values
would  necessarily  have been  realized at that date,  since  market  values may
differ  depending  on various  circumstances.  The  estimates  of fair values at
December 31, 2000 and 1999,  should not  necessarily  be  considered to apply at
subsequent dates.

                                      F-19
<PAGE>
                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

In addition, other assets and liabilities of the Company that are not defined as
financial  instruments  are  not  included  in the  above  disclosures,  such as
premises  and  equipment  and  life  insurance  contracts.   Also,  nonfinancial
instruments  typically not recognized in the financial  statements  nevertheless
may have value but are not  included in the above  disclosures.  These  include,
among other items, the estimated  earnings power of core deposit  accounts,  the
trained work force, customer goodwill and similar items.


NOTE 13 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION

Presented  below are  condensed  financial  statements  for the parent  company,
Lawrence Financial Holdings, Inc.

                             CONDENSED BALANCE SHEET
                                December 31, 2000

     ASSETS
     Cash and cash equivalents                              $     2,233,281
     Investment in subsidiary bank                               12,938,260
     Loan receivable from ESOP                                      530,873
                                                            ---------------
         Total assets                                       $    15,702,414
                                                            ===============

     LIABILITIES
     Accrued expenses and other liabilities                 $       762,469
     Shareholders' equity                                        14,939,945
                                                            ---------------

         Total liabilities and shareholders' equity         $    15,702,414
                                                            ===============


                           CONDENSED STATEMENT OF LOSS
           For the period December 29, 2000 through December 31, 2000

     Interest income                                        $         5,884
                                                            ---------------

     Income before income taxes and equity in
       undistributed losses of subsidiary bank                        5,884

     Equity in undistributed losses of subsidiary bank              (60,241)
                                                            ---------------

     Income before taxes                                            (54,357)

     Provision for income tax                                         2,000
                                                            ---------------

     Net loss                                               $       (56,357)
                                                            ===============

                                      F-20
<PAGE>
                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 13 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION (Continued)

                        CONDENSED STATEMENT OF CASH FLOWS
           For the period December 28, 2000 through December 31, 2000

Cash flows from operating activities
    Net loss                                                       $    (56,357)
    Adjustments to reconcile net income to net cash provided by
      operating activities
         Equity in undistributed losses of subsidiary bank               60,241
         Net change in accrued expenses and other liabilities           696,269
                                                                   ------------
             Net cash from operating activities                         700,153

Cash flows from investing activities
    Origination of loan receivable from ESOP                           (620,660)
    Repayment on loan receivable from ESOP                               89,787
    Purchase of stock in subsidiary bank                             (5,000,000)
                                                                   ------------
             Net cash from investing activities                      (5,530,873)

Cash flows from financing activities
    Proceeds from issuance of common stock, net of conversion
     costs                                                            7,064,001
                                                                   ------------

    Net change in cash and cash equivalents                           2,233,281

Cash and cash equivalents at beginning of period                             --
                                                                   ------------

Cash and cash equivalents at end of period                         $  2,233,281
                                                                   ============

The extent to which the  Company may pay cash  dividends  to  shareholders  will
depend on the cash  currently  available at the  Company,  as well as the Bank's
ability to pay dividends to the Company (see Note 11).

                                      F-21


<PAGE>

                       LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

NOTE 14 - CONVERSION TO STOCK FORM OF OWNERSHIP

On July  31,  2000,  the  Board  of  Directors  of the  Bank  adopted  a Plan of
Conversion  to convert from a federal  mutual  savings  bank to a federal  stock
savings bank with the concurrent  formation of a holding company. The conversion
was  consummated on December 28, 2000 by the adoption of a federal stock charter
and the sale of the holding  company's  common  stock in an amount  equal to the
consolidated  pro forma market  value of the holding  company and the Bank after
giving  effect to the  consideration.  The shares of common  stock were  offered
initially to the Bank's eligible deposit account holders,  then to other members
of the Bank.  Any shares of the holding  company's  common stock not sold in the
subscription  offering  were  offered  for sale to the  general  public,  giving
preference to residents of the Bank's market area.  Proceeds of $7,064,001  were
received  from the sale of 775,827  shares of common stock,  after  deduction of
conversion  costs of $694,269.  With the  conversion,  the Company issued 62,066
shares of common stock for the ESOP in exchange for a note  receivable  from the
ESOP. Upon the closing of the stock offering, the Company used $5 million of the
net  proceeds of the  conversion  to purchase  100% of the common  shares of the
Bank. The Bank is now a wholly-owned  subsidiary of the Company.  The conversion
was an internal  reorganization with historical balances carried forward without
adjustment.

At the time of  conversion,  the Bank  established a  liquidation  account in an
amount  equal to its total net worth as of the  latest  statement  of  financial
condition appearing in the final prospectus  ($8,336,785 at September 30, 2000).
The liquidation account is maintained for the benefit of eligible depositors who
continue  to  maintain  their  accounts  at the Bank after the  conversion.  The
liquidation  account  will  be  reduced  annually  to the  extent  the  eligible
depositors have reduced their qualifying  deposits.  Subsequent  increases in an
eligible  depositor's deposit account will not restore such person's interest in
the liquidation account. In the event of a complete  liquidation,  each eligible
depositor  will be  entitled  to  receive a  distribution  from the  liquidation
account in an amount  proportionate to the current adjusted  qualified  balances
for accounts then held.  The  liquidation  account  balance is not available for
payment of  dividends.  This is less  restrictive  than the dividend  limitation
discussed in Note 11.

Subsequent to  conversion,  the Bank may not declare or pay cash dividends on or
repurchase any of its common stock if the effect hereof would cause equity to be
reduced below applicable regulatory capital requirements.

                                      F-22

<PAGE>

CONFORMED

                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  the  Registrant  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   LAWRENCE FINANCIAL HOLDINGS, INC.


Date: March 30, 2001               By:  /s/ Jack L. Blair
                                        -----------------------
                                        Jack L. Blair
                                        President Chief Executive
                                         Officer and Director

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

      Name                      Title                                 Date
      ----                      -----                                 ----
/s/ Jack L. Blair               President, Chief Executive      March 30, 2001
-------------------------       Officer and Director
Jack L. Blair                   (principal executive officer)


/s/ RobRoy Walters              Senior Vice President,          March 30, 2001
-------------------------       Chief Financial Officer
RobRoy Walters                  (principal financial and
                                accounting officer)


/s/ Tracy E. Brammer, Jr.       Chairman of the Board           March 30, 2001
-------------------------
Tracy E. Brammer, Jr.


/s/ Charles E. Austin, II       Director                        March 30, 2001
-------------------------
Charles E. Austin, II


/s/ Herbert J. Karlet           Director                        March 30, 2001
-------------------------
Herbert J. Karlet


/s/ Phillip O. McMahon          Director                        March 30, 2001
-------------------------
Phillip O. McMahon


/s/ Robert N. Taylor            Director                        March 30, 2001
-------------------------
Robert N. Taylor