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, 2001

[  ] 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, 2001
were $10,342,000.

     The aggregate market value of the voting and non-voting common equity held
by non-affiliates was $13,011,000 based upon the average of the bid and asked
price ($17.50 per share) as quoted on the OTC-Bulletin Board on March 01, 2002.
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 01, 2002 was 743,490.

     Documents incorporated by reference: Portions of the proxy statement for
the 2002 annual meeting of stockholders are incorporated by reference in Part
III of this Form 10-KSB.

     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 . . . . . . . . . . . . . . . . . . . . .  28
Item 3.    Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .  29
Item 4.    Submission of Matters to a Vote of Security Holders . . . . . . .  29

                                     Part II

Item 5.    Market for Common Equity and Related Stockholder Matters  . . . .  29
Item 6.    Management's Discussion and Analysis  . . . . . . . . . . . . . .  30
Item 7.    Financial Statements  . . . . . . . . . . . . . . . . . . . . . .  39
Item 8.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure . . . . . . . . . . . .. . . . . . . . . . .  39

                                    Part III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act . . . . . . .  39
Item 10.   Executive Compensation  . . . . . . . . . . . . . . . . . . . . .  39
Item 11.   Security Ownership of Certain Beneficial Owners and Management. .  39
Item 12.   Certain Relationships and Related Transactions  . . . . . . . . .  39
Item 13.   Exhibits, List and Reports on Form 8-K  . . . . . . . . . . . . .  40


                                        2
<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 Holding's, 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. As a
result of the conversion, Lawrence Federal is a wholly owned subsidiary of
Lawrence Financial and all of the issued and outstanding capital stock of
Lawrence Federal is owned by 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. Four of Lawrence Federal's branch
offices are also in Lawrence County and the fifth is in adjacent Scioto County.
Lawrence and Scioto Counties, Ohio constitute


                                        3
<PAGE>

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 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 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,
                                            ----------------------------------------------------------------------------
                                                           2001                                    2000
                                            ------------------------------------    ------------------------------------
                                                 Amount            Percent               Amount            Percent
                                                                   of Total                                of Total
                                            -----------------  -----------------    -----------------  -----------------
                                                                      (Dollars in thousands)
<S>                                          <C>                   <C>               <C>                   <C>
Real estate loans:
   One- to four-family ...................   $47,070               45.7              $51,298               49.8
   Multi-family and commercial ...........     8,890                8.6                9,760                9.5
   Other .................................        --                 --                   --                 --
                                            --------              -----             --------              -----
      Total real estate loans ............    55,960               54.3               61,058               59.3
Consumer loans:
    Automobile ...........................    21,476               20.8               17,204               16.7
    Other ................................     8,744                8.5                8,970                8.7
                                            --------              -----             --------              -----
      Total consumer loans................    30,220               29.3               26,174               25.4
                                            --------              -----             --------              -----
Mobile home loans ........................    16,904               16.4               15,804               15.3
                                            --------              -----             --------              -----
      Total loans ........................   103,084              100.0              103,035              100.0
                                                                  =====                                   =====
Less:
   Net deferred loan origination costs ...     3,166                                   3,125
   Allowance for loan losses .............    (1,232)                                   (775)
                                            --------                                --------
   Total loans, net ......................  $105,018                                $105,385
                                            ========                                ========
</TABLE>

     The following table presents certain information at December 31, 2001
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, 2001
                                         -----------------------------------------------------------------------
                                                             Multi-
                                            One- to        Family and       Other      Consumer
                                            Four-          Commercial        Real         &             Total
                                            Family         Real Estate      Estate    Mobile Home       Loans
                                         -------------  ----------------  ---------- -------------   -----------
                                                                       (In thousands)
<S>                                      <C>                 <C>              <C>       <C>           <C>
Amounts due in:
   One year or less                         $274               $235           $--        $1,330         $1,839
   After one year:
   More than one year to three years         100                 28            --         4,718          4,846
   More than three years to five years       802                 --            --        18,748         19,550
   More than five years to 10 years        6,762              2,598            --         7,710         17,070
   More than 10 years to 15 years         12,663              2,492            --         6,432         21,587
   More than 15 years                     26,469              3,537            --         8,186         38,192
                                         -------             ------           ---       -------       ---------
      Total amount due                   $47,070             $8,890           $--       $47,124       $103,084
                                         =======             ======           ===       =======       =========
</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, 2001, the dollar amount of
loans contractually due after December 31, 2002, and whether such loans have
fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>
                                             ---------------------------------------
                                                    Due After December 31, 2002
                                             ---------------------------------------
                                               Fixed       Adjustable        Total
                                             ----------  --------------  -----------
                                                          (In thousands)
<S>                                            <C>           <C>             <C>
Real estate loans:
   One- to four-family ................        $33,543       $13,253          $46,796
   Multi-family and commercial ........          7,525         1,130            8,655
   Other ..............................             --            --               --
                                               -------       -------         ---------
      Total real estate loans .........         41,068        14,383           55,451
Consumer and mobile home loans ........         41,785         4,009           45,794
                                               -------       -------         ---------
      Total loans                              $82,853       $18,392         $101,245
                                               =======       =======         =========
</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, 2001, approximately 74% of Lawrence Federal's
residential mortgage loans had fixed interest rates and 26% had adjustable
interest rates.

     Lawrence Federal offers fixed-rate loans with terms up to 20 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 up to 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.

     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, 2001, 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, 2001, Lawrence Federal's
largest commercial real estate loan had an outstanding balance of $455,000. The
loan is secured by a real estate mortgage and personal guarantees. At December
31, 2001, 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 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%.


                                        7
<PAGE>

     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, 2001, Lawrence
Federal had 757 mobile homes loans, the average size of which was $25,457.

     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 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.

     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 makes automobile loans only to
borrowers who have higher credit ratings. Lawrence Federal does not make
automobile loans that would be


                                        8
<PAGE>

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. At
December 31, 2001, Lawrence Federal held $17.5 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, 2001,
Lawrence Federal had $8.9 million of such loans.

     Lawrence Federal offers home equity lines of credit and second mortgage
loans. At December 31, 2001, these loans totaled $1.0 million. 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 89% of the appraised
value of the property.

     Lawrence Federal offers proprietary credit cards. At December 31, 2001,
Lawrence Federal had approximately 1,433 credit card accounts with a total
balance of $965,000. 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, 2001, unsecured loans totaled $1.5 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, 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, 2001, Lawrence Federal's
regulatory limit on loans to one borrower was $2.0 million. At that date,
Lawrence Federal's largest amount of loans to one borrower, including the
borrower's related interests, was approximately $1.7 million and consisted of
commercial and residential real estate loans. These loans were performing
according to their original terms at December 31, 2001.


                                        9
<PAGE>

     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 occasionally purchases participation interests in
commercial mortgage loans through other financial institutions in its market
area. 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.

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

<TABLE>
<CAPTION>
                                               --------------------------------------
                                                               Year
                                                         Ended December 31,
                                               --------------------------------------
                                                      2001                2000
                                               -------------------  -----------------
                                                          (In thousands)
<S>                                                  <C>                <C>
Loans at beginning of period ..................      $103,035            $77,472
    Originations:
        Real estate loans:
           One- to four-family ................        10,373             15,594
           Multi-family and commercial ........         3,426                217
           Other ..............................            --                 --
                                                     --------           --------
                  Total real estate loans .....        13,799             15,811
        Consumer:
           Automobile .........................        13,754             18,219
           Other ..............................         6,324             11,915
        Mobile home ...........................         4,137              7,093
                                                     --------           --------
Total loans originated ........................        38,014             53,038

Participation loans purchased .................            --                 --
Deduct:
      Principal loan repayments
           and prepayments ....................        37,965             27,475
      Loan sales ..............................            --                 --
      Transfers to REO ........................            --                 --
                                                     --------           --------
            Sub-total .........................        37,965             27,475
                                                     --------           --------
Net loan activity .............................            49             25,563
                                                     --------           --------
      Loans at end of period ..................      $103,084           $103,035
                                                     ========           ========
</TABLE>


                                       10
<PAGE>

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

<TABLE>
<CAPTION>
                                                       -----------------------
                                                                   At
                                                             December 31,
                                                       -----------------------
                                                          2001         2000
                                                       ----------   ----------
                                                        (Dollars in thousands)
<S>                                                       <C>             <C>
Accruing loans past due 90 days or more:
   One- to four-family real estate ...............          $ --            $25
   Multi-family and commercial real estate .......            --             --
   Other real estate .............................            --             --
   Automobile ....................................           174             --
   Other consumer ................................            53             45
   Mobile home ...................................           291            516
                                                          ------           -----
         Total ...................................           518            586
Nonaccruing loans:
   One- to four-family real estate ...............           160             84
   Multi-family and commercial real estate .......            --             --
   Other real estate .............................            --             --
   Automobile ....................................           131             --
   Other consumer ................................            32             --
   Mobile home ...................................           429             --
                                                          ------           -----
         Total ...................................           752             84
Real estate owned (REO) ..........................            31             --
Other repossessed assets .........................             0              0
                                                          ------           -----
         Total nonperforming assets ..............         1,301            670
Troubled debt restructurings .....................            --             --
                                                          ------           -----
Troubled debt restructurings and
   total nonperforming assets ....................        $1,301           $670
                                                          ======           ====
Total nonperforming loans and
   troubled debt restructurings as a
   percentage of total gross loans ...............         1.20%          0.63%
Total nonperforming assets and
   troubled debt restructurings as a
   percentage of total assets ....................         0.95%          0.54%
</TABLE>

     Interest income that would have been recorded for the years ended December
31, 2001 had nonaccruing loans been current according to their original terms
amounted to approximately $27,500. No interest related to these loans was
included in interest income for the years ended December 31, 2001.


                                       11
<PAGE>

     Lawrence Federal ceases accruing interest on loans when principal or
interest payments are delinquent 120 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.

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

<TABLE>
<CAPTION>
                                                 At December 31, 2001
                            -----------------------------      --------------------------------
                                     60-89 Days                        90 Days or More
                            -----------------------------      --------------------------------
                              Number          Principal         Number            Principal
                                of            Balance             of              Balance of
                               Loans           of Loans          Loans              Loans
                            ------------      -----------      ----------       ---------------
                                                (Dollars in thousands)
<S>                                  <C>          <C>                 <C>               <C>
Real estate loans:
   One- to four-family ....          13             $395               6                  $160
   Multi-family and
      commercial ..........           1              225              --                    --
   Other ..................          --               --              --                    --
Consumer loans:
   Automobile .............          14              167              29                   305
   Other ..................          29               82              27                    85
Mobile home loans .........          25              537              33                   720
                                     --           ------              --                ------
      Total ...............          82           $1,406              95                $1,270
                                     ==           ======              ==                ======
Delinquent loans to
   total gross loans ......                        1.32%                                 1.20%

<CAPTION>
                                                At December 31, 2000
                            -----------------------------       -----------------------------
                                     60-89 Days                       90 Days or More
                            -----------------------------       -----------------------------
                               Number          Principal         Number          Principal
                                 of            Balance             of            Balance of
                               Loans           of Loans           Loans            Loans
                            -------------      ----------       ----------      -------------
                                                (Dollars in thousands)
<S>                                  <C>          <C>                  <C>             <C>
Real estate loans:
   One- to four-family ....            8            $342                3               $109
   Multi-family and
      commercial ..........           --              --               --                 --
   Other ..................           --              --               --                 --
Consumer loans:
   Automobile .............           20             161               --                 --
   Other ..................           76             380               13                 45
Mobile home loans .........           80           1,659               29                516
                                     ---          ------               --               ----
      Total ...............          184          $2,542               45               $670
                                     ===          ======               ==               ====
Delinquent loans to
   total gross loans ......                        2.39%                               0.63%
</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, 2001, Lawrence Federal had
$31,000 in 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 the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values 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


                                       12
<PAGE>

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.

     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 inherent in the loan portfolio. The allowance for loan losses represents
management's estimate of possible 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.


                                       13
<PAGE>

At December 31, 2001, Lawrence Federal's allowance for loan losses represented
1.16% of total gross loans and 94.70% 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 losses
may likely be necessary and results of operations could be adversely affected.
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.

<TABLE>
<CAPTION>
                                                                                           Year Ended December 31,
                                                                                -----------------------------------------------
                                                                                        2001                      2000
                                                                                ----------------------    ---------------------
                                                                                            (Dollars in Thousands)
<S>                                                                                            <C>                     <C>
Allowance for loan losses, beginning of year ................................                    $775                     $589
Charged-off loans:
   Real estate ..............................................................                     (31)                      --
   Consumer .................................................................                    (219)                    (119)
   Mobile home ..............................................................                      --                       --
                                                                                               ------                     ----
      Total charged-off loans ...............................................                    (250)                    (119)
Recoveries on loans previously charged off:
   Real estate ..............................................................                      --                       --
   Consumer .................................................................                      14                       10
   Mobile home ..............................................................                      --                       --
                                                                                               ------                     ----
      Total recoveries ......................................................                      14                       10
                                                                                               ------                     ----
Net loans charged-off .......................................................                    (236)                    (109)
Provision for loan losses ...................................................                     693                      295
                                                                                               ------                     ----

Allowance for loan losses, end of period ....................................                  $1,232                     $775
                                                                                               ======                     ====

Net loans charged-off to average loans ......................................                   0.22%                    0.12%
Allowance for loan losses to total loans ....................................                   1.16%                    0.73%
Allowance for loan losses to nonperforming loans and
   troubled debt restructuring ..............................................                  96.93%                  115.67%
</TABLE>


                                       14
<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,
                             -------------------------------------------------------------------------------
                                             2001                                    2000
                             --------------------------------------   --------------------------------------
                             Amount      Percent of         Percent   Amount      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
                                          Allowance          Loans                 Allowance          Loans
                             ------   ------------------   --------   ------   ------------------   --------
                                                        (Dollars in thousands)
<S>                          <C>              <C>              <C>      <C>            <C>              <C>
Real estate ...............    $249            20.2            54.3     $351            45.3            59.3
Consumer ..................     311            25.2            29.3      176            22.6            25.4
Mobile home ...............     672            54.6            16.4      208            26.8            15.3
Unallocated ...............      --              --             N/A       40             5.3             N/A
                             ------           -----                                    -----
   Total allowance
     for loan losses ......  $1,232           100.0                     $775           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.

     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.


                                       15
<PAGE>

     The investment portfolio consists primarily of debt issues. It is the
current practice of Lawrence Federal to invest in debt securities with
maturities of ten 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 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, 2001, 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.

<TABLE>
<CAPTION>
                                                                     At December 31,
                                                 ----------------------------------------------------
                                                          2001                        2000
                                                 ------------------------    ------------------------
                                                  Amortized        Fair       Amortized        Fair
                                                    Cost          Value          Cost         Value
                                                 -----------    ---------    -----------    ---------
                                                                     (In thousands)
<S>                                                  <C>         <C>              <C>         <C>
U.S. Treasury securities .......................     $    --     $    --          $   --      $   --
Obligations of U.S. government agencies ........       9,988      10,037           5,506       5,472
Other securities ...............................       1,008       1,009           1,013        959
                                                     -------     -------          ------      ------

            Total ..............................     $10,996     $11,046          $6,519      $6,431
                                                     =======     =======          ======      ======
</TABLE>


                                       16
<PAGE>

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

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                     --------------------------------------
                                                                            2001                2000
                                                                     --------------------  ----------------
                                                                                (In thousands)
<S>                                                                              <C>               <C>
Investment securities, beginning of period .........................             $ 6,431           $12,241
Purchases:
     Investment securities - available-for-sale ....................              11,483             2,050
Sales:
     Investment securities - available-for-sale ....................              (3,782)           (8,119)
Calls and maturities:
   Investment securities - available-for-sale ......................              (3,219)               --
(Amortization) accretion of premium/discount .......................                  (6)              (13)
Increase (decrease) in unrealized appreciation/depreciation ........                 139               272
         Net increase (decrease) in investment securities ..........               4,615            (5,810)
                                                                                 -------           -------
Investment securities, end of period ...............................             $11,046           $ 6,431
                                                                                 =======           =======
</TABLE>

     The table below sets forth certain information regarding the amortized
cost, weighted average yields and contractual maturities of Lawrence Federal's
debt securities as of December 31, 2001.

<TABLE>
<CAPTION>
                                                                At December 31, 2001
                              ------------------------------------------------------------------------------------------
                                   One Year or Less              More than One Year            More than Five Years
                                                                    to Five Years                  to Ten Years
                              ----------------------------- ------------------------------ -----------------------------
                               Amortized       Weighted       Amortized       Weighted       Amortized       Weighted
                                 Cost           Average         Cost           Average         Cost          Average
                                                 Yield                          Yield                         Yield
                              -------------  -------------- --------------- -------------- --------------  -------------
                                                                (Dollars in thousands)
<S>                                     <C>             <C>         <C>             <C>           <C>             <C>
U.S. Treasury Securities ....           --              --              --             --             --             --
Obligations of U.S.
  government agencies .......           --              --          $2,499          5.47%         $7,489          5.91%
Other securities ............           --              --              --             --             --             --
                                      ----            ----          ------          ----          ------          ----

   Total debt securities
   at fair value ............           --              --          $2,499          5.47%         $7,489          5.91%
                                                                    ======          ====          ======          ====

<CAPTION>
                                                At December 31, 2001
                              -----------------------------------------------------
                                  More than Ten Years               Total

                              ----------------------------  -----------------------
                                Amortized      Weighted       Amortized     Weighted
                                  Cost         Average          Cost        Average
                                                Yield                        Yield
                              -------------- -------------  --------------  -------
                                                (Dollars in thousands)
<S>                                  <C>            <C>           <C>        <C>
U.S. Treasury Securities ....            --            --              --       --
Obligations of U.S.
  government agencies .......         $  --           --%          $9,988     5.80%
Other securities ............         1,008          6.78           1,008   678.00%
                                     ------         ----          -------   ------

   Total debt securities
   at fair value ............        $1,008         6.78%         $10,996     5.89%
                                     ======         ====          =======     ====

</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.


                                       17
<PAGE>

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.
Lawrence Federal anticipates that it will increase its use of borrowed funds in
the future, depending on market conditions and its need for funds.

     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, 2001 had no brokered deposits.

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

                                          At December 31
                                       -------------------
                                         2001      2000
                                       --------   --------
                                          (In thousands)

Noninterest-bearing accounts ......... $  1,465   $  1,409
Passbook accounts ....................   22,210     19,568
Money market and NOW accounts ........   14,114     10,039
Certificates of deposit ..............   79,007     72,091
                                       --------   --------
     Total deposits .................. $116,796   $103,107
                                       ========   ========

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

                                                    Year Ended December 31,
                                                    -----------------------
                                                       2001         2000
                                                    ----------   ----------
                                                         (In thousands)

Beginning balance .................................. $103,107     $ 90,299
Increase (decrease) before interest credited .......    8,507        8,224
Interest credited ..................................    5,182        4,584
                                                     --------     --------
Net increase .......................................   13,689       12,808
                                                     --------     --------
      Ending balance ............................... $116,796     $103,107
                                                     ========     ========


                                       18
<PAGE>

     At December 31, 2001, Lawrence Federal had $17.4 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 .............     $ 1,797           4.54%
Over 3 through 6 months ..........       1,755           5.04%
Over 6 through 12 months .........       5,950           4.99%
Over 12 months ...................       7,862           5.04%
                                       -------
               Total .............     $17,364           4.97%
                                       =======

     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, 2001,
Lawrence Federal had arranged the ability to borrow a total of approximately $15
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:

<TABLE>
<CAPTION>
                                                             ----------------------
                                                                   Year Ended
                                                                  December 31,
                                                             ----------------------
                                                              2001            2000
                                                             ------          ------
                                                             (Dollars in thousands)
<S>                                                           <C>            <C>
FHLB advances:
   Average balance outstanding .............................. 2,065           5,172
   Maximum amount outstanding at any month-end
      during the period ..................................... 2,000          10,000
   Balance outstanding at end of period ..................... 2,000           5,000
   Weighted average interest rate during the period ......... 5.96%           6.69%
   Weighted average interest rate at end of period .......... 5.91%           6.75%
</TABLE>


                                       19
<PAGE>

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,
2001, Lawrence Federal's equity investment in its subsidiary was $179,000 or
1.3% of total assets. Lawrence Financial Services Corp. holds real property for
investment purposes.

Personnel

     As of December 31, 2001, Lawrence Federal had 41 full-time employees and
two 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.


                                       20
<PAGE>

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 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.


                                       21
<PAGE>

     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 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. At December 31, 2001, Lawrence Federal met each of its
capital requirements.

     The following table presents Lawrence Federal's capital position at
December 31, 2001.

<TABLE>
<CAPTION>
                                                                         Capital
                                                                  ----------------------
                           Actual       Required       Excess       Actual     Required
                          Capital        Capital       Amount      Percent      Percent
                         ---------     ----------     --------    ---------   ----------
                                                (Dollars in thousands)
<S>                        <C>             <C>          <C>           <C>           <C>
Tangible ...............   $13,212         $5,381       $7,831         9.82         1.50
Core (Leverage) ........    13,212          5,381        7,831         9.82         4.00
Risk-based .............    14,467          7,936        6,531        14.58         8.00
</TABLE>

     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


                                       22
<PAGE>

"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.

     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.


                                       23
<PAGE>

     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, 2001, 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 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.


                                       24
<PAGE>

     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
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, 2001 of $587,000.


                                       25
<PAGE>

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: a
3% reserve ratio is assessed on net transaction accounts up to and including
$41.3 million: a 10% reserve ratio is applied above $41.3 million. The first
$5.7 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 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 2001 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.


                                       26
<PAGE>

     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.

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 1.3% of the Lawrence
Federal's apportioned book net worth, determined under generally accepted
accounting principles,


                                       27
<PAGE>

less any statutory deduction. 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 will be exempt from Maryland corporate income tax.

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
                                                        or Leasehold
                                  Original Year       Improvements at
Location                             Acquired        December 31, 2001
Main/Executive Office:                                 (In thousands)

311 South 5th Street
Ironton, Ohio 45638                   1976                $  730

Drive Through Facility:
511 Vernon Street
Ironton, Ohio 45638                   1997                   188

Branch Offices:

401 2nd Avenue
Chesapeake, Ohio 45619                1960                    82

7510 State Route 7
Proctorville, Ohio 45669              1993                   144

404 Solida Road
South Point, Ohio 45680               1975                   158

9000 Ohio River Road
Wheelersburg, Ohio 45694              1998                   651
                                                          ------

               Total                                      $1,953
                                                          ======


                                       28
<PAGE>

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
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.

                                    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, 2001, there were 780,490 shares of common
stock outstanding and 186 stockholders, excluding persons or entities who hold
stock in nominee or "street name."

     The following table shows the high and low sales price and dividends paid
on Lawrence Financial's common stock for the periods indicated.

Quarter Ended                 High          Low       Dividends Paid
-------------                 ----          ---       --------------
December 31, 2000 ......... $11.125      $10.625         $     --
March 31, 2001 ............  11.813       11.063               --
June 30, 2001 .............   13.00        11.37               --
September 30, 2001 ........   16.37        12.25               --
December 31, 2001 .........   15.50        13.90             0.07

     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.


                                       29
<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 Holdings, Inc. (Company), through its wholly owned
subsidiary Lawrence Federal Savings Bank (Bank), operates as a
community-oriented full 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 the Bank would
otherwise be able to originate. In addition, the origination of shorter term
consumer loans helps the Company manage its interest rate risk. Lawrence Federal
intends to continue to focus on further expansion of its non-mortage lending .

Comparison of Financial Condition at December 31, 2001 and 2000

     During the fiscal year 2001, total assets increased $12.6 million, or 10%,
to $136.4 million at December 31, 2001. The increase in assets in 2001 primarily
reflected growth of the Company's term investment portfolios. At December 31,
2001, cash and cash equivalent balances had increased $8.5 million, or 173%, and
securities available for sale had increased by $4.6 million, or 72%, when
compared to the same date in 2000. During the year ended December 31, 2001,
gross loans receivable remained stable increasing only $90,000, or 0.08%.
Consumer loans grew $4.0 million, or 15%, real estate loans decreased $5.1
million, or 8%, and mobile home loans grew $1.1 million, or 7%. The majority of
the growth in consumer loans came from the indirect automobile lending program
which began in April 2000, while real estate loans decreased as a result of
highly competitive fixed rate, long term loans being offered by several regional
banks and mortgage brokers. The outstanding balance of mobile home loans
increased in the first half of 2001 and has been declining in the second half of
the year which reflects the Bank's efforts to slowly reduce the concentration of
mobile home loans in the portfolio.

     During 2001, total deposits and borrowings increased $10.7 million, or 10%
to $118.8 million at December 31, 2001. For the fiscal year 2001, deposits
increased $13.7 million, or 13%, and Federal Home Loan Bank advances decreased
by $3.0 million. Deposits grew during this period as a result of marketing
efforts and competitively priced products.

     Equity increased $0.8 million, or 6%, during fiscal year 2001 to $15.8
million at December 31, 2001. During the year ending December 31, 2001, retained
earnings increased $576,000 as a result of net income


                                       30
<PAGE>

while accumulated other comprehensive income improved from an unrealized loss of
$58,000 to an unrealized gain of $33,000, primarily as a result of changes to
the securities available-for-sale portfolio arising during the period. Equity
decreased $54,000 as the Company paid a $0.07 per share cash dividend to
shareholders in December, 2001.

Comparison of Operating Results for the Years Ended December 31, 2001 and 2000

     General. The Company's net income increased 36% to $576,000 for 2001 from
$422,000 for 2000. Return on average assets was 0.44% in 2001 and 0.38% in 2000,
and return on average equity was 3.70% in 2001 and 5.10% in 2000. Net interest
income, net of provision for loan losses, increased $651,000, or 22%, while
noninterest income, exclusive of sale of securities, increased $137,000, or 26%.
The increase in net interest income was primarily the result of an increase of
35 basis points in the Company's net interest margin and an increase of $19.2
million in average earning asset balances during fiscal year 2001. Offsetting
the increase in net interest income was a 27% increase in noninterest expense.
There are several causes for the increase in non-interest expense. The Company
has expensed $157,000 for its Employee Stock Ownership Program (ESOP) and for
the stock awards compared to $68,000 during 2000. The Company has also
experienced increases in: salaries and wages paid; the cost of employee
benefits; data processing; professional services; and other non-interest
expenses related to the additional financial reporting processes required of a
public company and the growth of the Company's customer base.

     Interest Income. Interest income increased $1.4 million, or 17%, in 2001
compared to 2000. Interest income on loans increased $1.5 million, or 20%,
primarily as a result of growth in the average balances of the loan portfolio.
However, the gain resulting from increased average volume was partially offset
by a 10 basis point decline in the yield on average earning assets. Interest
income on short term investments increased $151,000, or 370%, primarily as a
result of larger average balances in 2001. The average yield on interest-earning
assets decreased to 7.95% in 2001 from 8.05% in 2000, as short term investments
became a greater percentage of the interest-earning asset mix.

     Interest Expense. Interest expense increased $375,000, or 7.6%, in 2001
compared to 2000. Interest paid on deposits increased $598,000, or 13%, as a
result of growth in deposit accounts. Interest paid on Federal Home Loan Bank
advances was $123,000 in 2001 compared to $346,000 in 2000. The average cost of
interest-bearing liabilities decreased 13 basis points to 4.66% in 2001 from
4.79% in 2000, primarily as a result of reduced market rates on certificates of
deposit and savings accounts.

     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 loss
percentages to classified loans within the major loan categories.

     The provision for loan losses was $693,000 for 2001 compared to $295,000
for 2000. The provision for 2001 and 2000 reflected management's assessment of
probable losses, which is impacted by changes in the composition of the loan
portfolio, particularly the growth of indirect automobile, indirect mobile home,
and direct consumer loans. In the fourth quarter of 2001 the provision for loan
losses was $513,000 compared to $125,000 during the same three month period in
2000. The increase in the provision and the allowance for loan losses during the
fourth quarter is a result of asset quality deterioration evidenced by an
increase in total nonperforming assets. (See pages 11 through 15 of this filing
for more information.)


                                       31
<PAGE>

     Management provided $693,000 to the allowance during the twelve-months
ended December 31, 2001. At December 31, 2001, the Company's allowance for loan
losses as a percentage of gross loans outstanding increased by 43 basis points,
from 0.73% to 1.16%, when compared to the same period in 2000. Allowance for
loan losses totaled $1.2 million at December 31, 2001, an increase of $457,000,
or 59%, compared to the same date in 2000. The mix of the allowance also changed
with the portion allocated to real estate loans decreasing by $102,000, or 29%,
the portion of the allowance allocated to consumer loans increasing by $135,000,
or 77%, and mobile home reserves increasing by $464,000, or 223%. Management
believes that the average balance of outstanding indirect automobile loans will
not grow significantly beyond its ending balance at December 31, 2001.
Management also believes that the average balance of outstanding indirect mobile
home loans will decrease from its ending balance at December 31, 2001.

     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 2001 to 2000.

<TABLE>
<CAPTION>
                                                           Dollar      Percentage
                                        2001      2000     Change        Change
                                       ------    ------   --------    ------------
                                                   (Dollars in Thousands)
<S>                                     <C>      <C>        <C>           <C>
Net securities gains (losses) ........  $ 21     $(157)      178          N/A
Service charges ......................   430       375        55           15
Other ................................   231       149        82           55
                                        ----     -----      ----
      Total ..........................  $682     $ 367      $315           86
                                        ====     =====      ====
</TABLE>

     Net securities gains increased in fiscal year 2001 as Lawrence Federal sold
securities at a gain of $21,000 compared to ($157,000) in loss reported in the
same period of 2000. Service charges increased in 2001 as a result of growth in
the number of deposit accounts and adjustments to fee schedules. Lawrence
Federal will continue to monitor the fee schedules of in-market competitors and
adjust our products to reflect current market pricing. Other income consists of
increases in the cash surrender value of life insurance policies and other
miscellaneous items.

     Noninterest Expense. The following table shows the components of
noninterest expense and the dollar and percentage change from 2001 to 2000.

<TABLE>
<CAPTION>
                                                           Dollar      Percentage
                                        2001      2000     Change        Change
                                       ------    ------   --------    ------------
                                                   (Dollars in Thousands)
<S>                                    <C>       <C>        <C>           <C>
Salaries and benefits ................ $1,600    $1,229     $371           30
Deposit insurance premiums ...........     37        19       18           19
Occupancy and equipment ..............    376       351       25           7
Data processing ......................    529       429      100           23
Franchise tax ........................     83        91       (8)          (9)
Advertising expense ..................     88        99      (11)         (11)
Other ................................    819       565      254           45
                                       ------    ------     ----
      Total .......................... $3,532    $2,783     $749           27
                                       ======    ======     ====
</TABLE>


                                       32
<PAGE>

     Salaries and benefits increased as a result of: normal annual merit
increases in salaries, recording a full year of expense related to additional
customer contact and finance personnel which worked a partial year in 2000; a
38% increase in premiums paid for employee health care insurance; and the
recognition of the expense related to employee stock ownership and incentive
plans. Data processing expense increased as a result of the growth in the number
of loan and deposit accounts maintained. During fiscal year 2000 the majority of
the expense related to professional services were capitalized as part of the
cost of the conversion from a mutual to a stock corporation. In fiscal year 2001
the cost of outside professional services was an operational expense recognized
during the year. In 2001 the Company expensed $177,000 more in professional
services when compared to 2000. This increase accounts for 61% of the total
increase in "Other" noninterest expense. In addition to the increase in
professional service expense the Company experienced an increase in other
noninterest expense categories related to the growth of Lawrence Federal and the
reporting requirements of a publicly traded company.

     Income Tax Expense. The provision for income tax was $235,000 in 2001
compared to $172,000 in 2000. The provision increased as a result of greater
taxable income. The effective tax rate was 29.3% compared with 29.0% for 2001and
2000.


                                       33
<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,
                                                     ---------------------------------------------------------------
                                                                   2001                           2000
                                                     ------------------------------   ------------------------------
                                                                           Average                          Average
                                                      Average               Yield/     Average              Yield/
                                                      Balance   Interest     Rate      Balance   Interest    Rate
                                                     --------- ---------- ---------   --------- ---------- ---------
                                                                              (Dollars in Thousands)
<S>                                                   <C>         <C>        <C>       <C>         <C>        <C>
Interest-earning assets:
   Loans (1) ......................................   $107,231    $8,967     8.36      $ 90,696    $7,492     8.26
   Securities (2) .................................      8,171       502     6.14        10,671       679     6.36
   Interest-bearing deposits ......................      6,082       192     3.16           899        65     7.23
                                                      --------    ------               --------    ------
        Total interest-earning assets .............    121,484     9,661     7.95       102,266     8,236     8.05
Non-interest-earning assets .......................      9,775                            9,233
                                                      --------                         --------
         Total assets .............................   $131,259                         $111,499
                                                      ========                         ========

Interest-bearing liabilities:
   Deposits:
      Passbook accounts ...........................   $ 20,416       548     2.68      $ 18,690       510     2.73
      Money market accounts .......................        786        25     3.18           881        24     2.72
      NOW accounts ................................     13,335       288     2.16        12,398       257     2.07
      Certificates of deposit .....................     77,268     4,321     5.59        65,682     3,793     5.77
                                                      --------    ------               --------    ------
         Total deposits ...........................    111,805     5,182     4.64        97,651     4,584     4.69
   FHLB advances ..................................      2,065       123     5.96         5,172       346     6.69
                                                      --------    ------               --------    ------
         Total interest-bearing
           liabilities ............................    113,870     5,305     4.66       102,823     4,930     4.79
                                                                  ------                           ------
Non-interest-bearing liabilities ..................      1,801                              388
         Total liabilities ........................    115,671                          103,211
Total retained earnings ...........................     15,588                            8,278
                                                      --------                         --------
         Total liabilities and retained
           earnings ...............................   $131,259                         $111,489
                                                      ========                         ========

   Net interest-earning assets ....................   $  7,027                             (557)
                                                      ========                         ========
   Net interest income/interest rate spread (3) ...               $4,356     3.29%                 $3,306     3.26%
                                                                  ======     ====                  ======     ====
   Net interest margin (4) ........................                 3.59%                            3.23%
                                                                    ====                             ====
   Ratio of interest-earning assets
     to interest-bearing liabilities ..............     115.27%                          108.44%
                                                      ========                         ========
</TABLE>

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

(1)  Balances are net of deferred loan origination costs, 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.


                                       34
<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
prior 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.

<TABLE>
<CAPTION>
                                                     -----------------------------------------------------------
                                                                    Year Ended December 31, 2001
                                                                            Compared to
                                                                    Year Ended December 31, 2000
                                                     -----------------------------------------------------------
                                                             Increase (Decrease)
                                                                   Due to
                                                     ------------------------------------     ------------------
                                                          Rate                Volume                 Net
                                                     ----------------     ---------------     ------------------
                                                                       (Dollars in thousands)
<S>                                                      <C>                  <C>                   <C>
Interest-earning assets:
   Loans ...........................................     $ 107                $1,368                $1,475
   Securities ......................................       (18)                 (159)                 (177)
   Interest-earning deposits .......................      (247)                  374                   127
                                                         -----                ------                ------
         Total interest-earning assets .............      (158)                1,583                 1,425
Interest-bearing liabilities:
   Deposits:
      Passbook accounts ............................     $ (10)               $   48                $   38
      Money market accounts ........................         4                    (3)                    1
      NOW accounts .................................        12                    19                    31
      Certificates of deposit ......................      (140)                  668                   528

  FHLB advances ....................................       (19)                 (204)                 (223)
                                                         -----                ------                ------
         Total interest-bearing liabilities ........      (153)                  528                   375
                                                         -----                ------                ------
Increase (decrease) in net interest income .........     $  (5)               $1,055                $1,050
                                                         =====                ======                ======
</TABLE>

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


                                       35
<PAGE>

(4) emphasizing longer-term certificates of deposit to better structure
maturities of its interest rate sensitive 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.

     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 September 30, 2001, 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.

<TABLE>
<CAPTION>
---------------------------                                                             ------------------------------------------
         Change in                                                                                NPV as % of Portfolio
      Interest Rates                                                                                 Value of Assets
     In Basis Points
       (Rate Shock)
                              -------------------------------------------------------   ------------------------------------------
                                               Net Portfolio Value                            NPV                   Change (1)
                              -------------------------------------------------------        Ratio
                                 Amount           $ Change             % Change
---------------------------   --------------    --------------    -------------------      -----------           -----------------
                                                (Dollars in thousands)
<S>                                 <C>              <C>                        <C>            <C>                          <C>
           300                      $10,052          $(5,444)                   (35)            7.82%                       (359)
           200                       12,113           (3,384)                   (22)            9.23%                       (218)
           100                       13,899           (1,597)                   (10)           10.40%                       (101)
          Static                     15,496               --                     --            11.41%                         --
           -100                      16,824            1,327                      9            12.21%                         80
           -200                      18,164            2,667                     17            13.00%                        159
           -300                          --               --                     --               --                          --
</TABLE>

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

(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.

     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.


                                       36
<PAGE>

     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 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

     On January 22, 2002 Lawrence Financial announced that the Company's Board
of Directors had approved the repurchase of up to 94,000 shares, or
approximately 12% of the Company's outstanding common stock. The program began
on February 07, 2002, three business days after the release of earnings for the
year ended December 31, 2001. Repurchases, which will be conducted through open
market purchases or privately negotiated transactions, will be made from time to
time depending on market conditions and other factors. Funding for the
repurchase of stock may serve to reduce liquidity levels at the Company.
Repurchased shares will be held in treasury, reducing the Company's total
equity, and will be available for the Company's benefit plans.

     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, 2001, cash and short-term
investments totaled $11.4 million. Securities classified as available-for-sale
totaled $11.6 million at December 31, 2001. In addition, at December 31, 2001,
Lawrence Federal had arranged the ability to borrow a total of approximately
$15.0 million from the Federal Home Loan Bank of Cincinnati. On that date,
Lawrence Federal had advances outstanding of $2.0 million.

     The primary investing activities of Lawrence Federal are the origination of
loans and the purchase of securities. In 2001, Lawrence Federal originated $38.0
million of loans and purchased $11.5 million of securities. In 2000, Lawrence
Federal originated $53.0 million of loans and purchased $2.0 million of
securities.


                                       37
<PAGE>

     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 $13.7 million and $12.9 million for 2001 and 2000,
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 2001, Federal Home Loan Bank advances
decreased $3.0. During 2000, Federal Home Loan Bank advances increased $0.5
million.

     At December 31, 2001, Lawrence Federal had outstanding commitments to
originate loans of $5.8 million. 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. Certificates of
deposit that are scheduled to mature in one year or less from December 31, 2001
totaled $57.3 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,
2001, 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 note 10 of the notes to the financial statements.

Impact of Accounting Pronouncements

     Accounting for Derivative Instruments and Hedging Activities. A new
accounting standard requires all business combinations to be recorded using the
purchase method of accounting for any transaction initiated after June 30, 2001.
Under the purchase method, all identifiable tangible and intangible assets and
liabilities of the acquired company must be recorded at fair value at date of
acquisition, and the excess of cost over fair value of net assets acquired is
recorded as goodwill. Identifiable intangible assets must be separated from
goodwill. Identifiable intangible assets with finite useful lives will be
amortized under the new standard, whereas goodwill, both amounts previously
recorded and future amounts purchased, will cease being amortized starting in
2002. Annual impairment testing will be required for goodwill with impairment
being recorded if the carrying amount of goodwill exceeds its implied fair
value. Adoption of this standard on January 1, 2002 will not have a material
effect on the Company's financial statements.

Effect of Inflation and Changing Prices

     The consolidated financial statements and related financial data presented
in this report have been prepared following accounting principles generally
accepted in the United States of America, 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.


                                       38
<PAGE>

Item 7. Financial Statements

     The financial statements listed at Item 13 of this Form 10-KSB 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 information relating to the directors and officers of Lawrence
Financial and information regarding compliance with Section 16(a) of the
Exchange Act is incorporated herein by reference to Lawrence Financial's Proxy
Statement for the 2002 Annual Meeting of Stockholders at pages 5 and 11.

Item 10. Executive compensation

     The information regarding executive compensation is incorporated herein by
reference to Lawrence Financial's Proxy Statement for the 2002 Annual Meeting of
Stockholders at pages 8 through 10.

Item 11. Security ownership of certain beneficial owners and management

     The information relating to security ownership of certain beneficial owners
and management is incorporated herein by reference to Lawrence Financial's Proxy
Statement for the 2002 Annual Meeting of Stockholders at pages 4 and 5.

Item 12. Certain relationships and related transactions

     The information relating to certain relationships and related transactions
is incorporated herein by reference to Lawrence Financial's Proxy Statement for
the 2002 Annual Meeting of Stockholders at page 11.


                                       39
<PAGE>

Item 13. Exhibits, list and reports on Form 8-K.

(a) (1) The following consolidated financial statements of Lawrence Federal are
                filed as part of this document under Item 7.
        o       Report of Independent Auditors.
        o       Consolidated Balance Sheets for the years ended December 31,
                2001 and 2000.
        o       Consolidated Statements of Income for the years ended December
                31, 2001 and 2000.
        o       Consolidated Statements of Comprehensive Income for the years
                ended December 31, 2001 and 2000.
        o       Consolidated Statements of Equity for the years ended December
                31, 2001 and 2000.
        o       Consolidated Statements of Cash Flows for the years ended
                December 31, 2001 and 2000.
        o       Notes to Consolidated Financial Statements

        (2)    All financial statement schedules are omitted because they are
               not required or applicable, or the required  information is shown
               in the consolidated financial statements or the notes thereto.

        (3)    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(2)
               10.2   Lawrence Financial Holdings, Inc. Employment Agreement
                      with Jack L. Blair(2)
               10.3   Lawrence Federal Savings Bank 401 (k) Savings Plan(1)
               10.4   Lawrence Federal Savings Bank Employee Severance
                      Compensation Plan(2)
               10.5   Lawrence Federal Savings Bank Supplemental Executive
                      Retirement Plan(2)
               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)
               10.10  Lawrence Financial Holdings, Inc. 2001 Stock-Based
                      Incentive Plan.(3)
               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.

        (2)    Incorporated herein by reference from the Exhibits to the
               Company's Annual Report on Form 10-KSB for the year ended
               December 31, 2001.

        (3)    Incorporated herein by reference to Appendix A to the Company's
               Proxy Statement for its 2002 annual meeting of shareholders filed
               on April 04, 2002.

(b)     Reports on Form 8-K

               None.


                                       40
<PAGE>

                                   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 19, 2002                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 19, 2002
-------------------------     Officer and Director            --------------
Jack L. Blair                 (principal executive officer)

/s/ RobRoy Walters            Chief Financial Officer         March 19, 2002
-------------------------     (principal financial and        --------------
RobRoy Walters                accounting officer)

/s/ Tracy E. Brammer, Jr.     Chairman of the Board           March 19, 2002
-------------------------                                     --------------
Tracy E. Brammer, Jr.

/s/ Charles E. Austin, II     Director                        March 19, 2002
-------------------------                                     --------------
Charles E. Austin, II

/s/ Herbert J. Karlet         Director                        March 19, 2002
-------------------------                                     --------------
Herbert J. Karlet

/s/ Phillip O. McMahon        Director                        March 19, 2002
-------------------------                                     --------------
Phillip O. McMahon

/s/ Robert N. Taylor          Director                        March 19, 2002
-------------------------                                     --------------
Robert N. Taylor


                                       41
<PAGE>

                                  Exhibit 23.0

                         CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 of Lawrence Financial Holdings, Inc., filed with the
Securities and Exchange Commission (SEC No. 333-57540 and SEC No. 333-76086), of
our report dated January 25, 2002 on the consolidated balance sheets of Lawrence
Financial Holdings, Inc. as of December 31, 2001 and 2000, and the related
consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for the years then ended; which report is
included in this Annual Report on Form 10-KSB.

<PAGE>


                        LAWRENCE FINANCIAL HOLDINGS, INC.
                                  Ironton, Ohio

                        CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000
<PAGE>

                         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, 2001 and 2000, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting 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, 2001 and 2000, and results of its operations and cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

                                                   Crowe, Chizek and Company LLP

Columbus, Ohio
January 25, 2002

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


                                                                              1.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000

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

<TABLE>
<CAPTION>
                                                                          2001             2000
                                                                          ----             ----
<S>                                                                   <C>              <C>
ASSETS
     Cash and due from banks                                          $  13,136,137    $   2,206,856
     Merrill Lynch money market fund                                        213,124        2,678,223
                                                                      -------------    -------------
         Total cash and cash equivalents                                 13,349,261        4,885,079
     Securities available for sale, at fair value                        11,045,872        6,430,911
     Loans receivable - net                                             105,017,604      105,385,397
     Federal Home Loan Bank stock                                           587,000          549,100
     Premises and equipment, net                                          3,315,192        3,453,094
     Accrued interest receivable                                            797,483          815,816
     Cash surrender value of life insurance                               1,975,177        1,870,231
     Other assets                                                           340,858          455,590
                                                                      -------------    -------------
                                                                      $ 136,428,447    $ 123,845,218
                                                                      =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY
     Liabilities
         Noninterest-bearing deposits                                 $   1,465,129    $   1,409,413
         Interest-bearing deposits                                      115,330,755      101,697,172
                                                                      -------------    -------------
              Total deposits                                            116,795,884      103,106,585
         Federal Home Loan Bank borrowings                                2,000,000        5,000,000
         Other liabilities                                                1,854,265          798,688
                                                                      -------------    -------------
              Total liabilities                                         120,650,149      108,905,273

     Shareholders' Equity
         Common stock; par value $0.01 per share; shares
           authorized:  4,000,000; shares issued:  799,110 in 2001,
           775,827 in 2000                                                    7,991            7,696
         Additional paid-in capital                                       7,426,239        6,994,305
         Retained earnings                                                9,076,779        8,555,006
         Unearned ESOP shares (unearned shares: 49,666
           in 2001, 55,866 in 2000)                                        (496,660)        (558,660)
         Unearned restricted stock awards
           (unearned shares: 18,620 in 2001)                               (269,059)              --
         Accumulated other comprehensive income (loss), net
           of tax of $17,004 in 2001 and $(30,086) in 2000                   33,008          (58,402)
                                                                      -------------    -------------
              Total shareholders' equity                                 15,778,298       14,939,945
                                                                      -------------    -------------

                  Total liabilities and shareholders' equity          $ 136,428,447    $ 123,845,218
                                                                      =============    =============
</TABLE>

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

          See accompanying notes to consolidated financial statements.


                                                                              2.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                     Years ended December 31, 2001 and 2000

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

                                                         2001          2000
                                                         ----          ----
Interest income
     Loans, including fees                            $ 8,966,555   $ 7,492,361
     Taxable securities                                   502,083       703,318
     Overnight deposits                                   192,083        40,840
                                                      -----------   -----------
                                                        9,660,721     8,236,519

Interest expense
     Deposits                                           5,182,311     4,584,344
     Federal Home Loan Bank borrowings                    122,998       346,051
                                                      -----------   -----------
                                                        5,305,309     4,930,395
                                                      -----------   -----------

Net interest income                                     4,355,412     3,306,124

Provision for loan losses                                 692,958       295,000
                                                      -----------   -----------

Net interest income after provision for loan losses     3,662,454     3,011,124

Noninterest income
     Net securities gains (losses)                         20,851      (156,828)
     Service charges                                      430,359       374,697
     Other                                                230,390       148,808
                                                      -----------   -----------
                                                          681,600       366,677

Noninterest expense
     Salaries and benefits                              1,599,545     1,228,798
     Deposit insurance premiums                            36,660        19,196
     Occupancy and equipment                              376,065       351,124
     Data processing                                      529,323       428,603
     Franchise tax                                         83,391        91,139
     Advertising expense                                   88,315        99,303
     Other                                                819,192       564,972
                                                      -----------   -----------
                                                        3,532,491     2,783,135
                                                      -----------   -----------

Income before income tax                                  811,563       594,666

Provision for income tax                                  235,482       172,362
                                                      -----------   -----------

Net income                                            $   576,081   $   422,304
                                                      ===========   ===========

Basic and diluted earnings (loss) per common share
  subsequent to conversion                            $      0.80   $     (0.08)
                                                      ===========   ===========

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

          See accompanying notes to consolidated financial statements.


                                                                              3.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     Years ended December 31, 2001 and 2000

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

                                                         2001         2000
                                                         ----         ----

Net income                                             $ 576,081    $ 422,304
Other comprehensive income:
     Unrealized gains (losses) arising during period     159,351      271,637
     Reclassification adjustment for (gains) losses
       included in net income                            (20,851)     156,828
                                                       ---------    ---------
                                                         138,500      428,465
     Income tax expense                                  (47,090)    (145,678)
                                                       ---------    ---------
         Other comprehensive income, net of tax           91,410      282,787
                                                       ---------    ---------

Comprehensive income                                   $ 667,491    $ 705,091
                                                       =========    =========

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

          See accompanying notes to consolidated financial statements.


                                                                              4.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Years ended December 31, 2001 and 2000

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

<TABLE>
<CAPTION>
                                                                                             Unearned    Accumulated
                                                     Additional                  Unearned   Restricted     Other
                                           Common      Paid-In      Retained       ESOP        Stock    Comprehensive
                                            Stock      Capital      Earnings      Shares      Awards       Income         Total
                                            -----      -------      --------      ------      ------       ------         -----
<S>                                        <C>       <C>           <C>          <C>          <C>          <C>           <C>
Balance, January 1, 2000                   $   --    $       --    $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 and effect
   of 6,200 shares committed to be
   released under the ESOP                    (62)      (61,938)           --    (558,660)          --           --        (620,660)
                                           ------    ----------    ----------   ---------    ---------    ---------     -----------

Balance - December 31, 2000                 7,696     6,994,305     8,555,006    (558,660)          --      (58,402)     14,939,945

Net income                                     --            --       576,081          --           --           --         576,081
Net unrealized appreciation on
   securities available for sale,
   net of tax of $47,089                       --            --            --          --           --       91,410          91,410
Cash dividend - $0.07 per share                --            --       (54,308)         --           --           --         (54,308)
Stock-based compensation - 23,283 stock
   awards issued and 4,663 stock
   awards earned and 6,200 shares
   committed to be released under ESOP        295       431,934            --      62,000     (269,059)          --         225,170
                                           ------    ----------    ----------   ---------    ---------    ---------     -----------

Balance, December 31, 2001                 $7,991    $7,426,239    $9,076,779   $(496,660)   $(269,059)   $  33,008     $15,778,298
                                           ======    ==========    ==========   =========    =========    =========     ===========
</TABLE>

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

          See accompanying notes to consolidated financial statements.


                                                                              5.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2001 and 2000

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

<TABLE>
<CAPTION>
                                                                        2001            2000
                                                                        ----            ----
<S>                                                                 <C>             <C>
Cash flows from operating activities
     Net income                                                     $    576,081    $    422,304
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation                                                    208,601         197,191
         Provision for loan losses                                       692,958         295,000
         Stock dividend on Federal Home Loan Bank stock                  (37,900)        (38,300)
         Premium amortization                                              6,317          12,856
         Net securities (gains) losses                                   (20,851)        156,828
         Deferred tax benefit                                           (198,886)        (69,921)
         Compensation expense for MRP shares                              67,380              --
         Compensation expense for ESOP shares                             89,590          68,200
         Change in other assets and liabilities                        1,423,344         365,191
                                                                    ------------    ------------
              Net cash from operating activities                       2,806,634       1,409,349

Cash flows from investing activities
     Purchase of:
         Securities available for sale                               (11,482,985)     (2,050,000)
         Premises and equipment                                         (139,357)       (112,264)
     Proceeds from:
         Sale of securities available for sale                         3,782,100       8,119,045
         Calls, maturities and principal repayments of securities
           available for sale                                          3,219,000              --
     Net change in loans                                                (356,201)    (26,899,337)
                                                                    ------------    ------------
              Net cash from investing activities                      (4,977,443)    (20,942,556)

Cash flows from financing activities
     Net change in:
         Deposits                                                     13,689,299      12,807,313
         Federal Home Loan Bank short-term borrowings                 (3,000,000)     (1,500,000)
     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 dividend paid                                                  (54,308)             --
     Cash provided to ESOP to acquire common stock                            --        (620,660)
                                                                    ------------    ------------
              Net cash from financing activities                      10,634,991      19,750,654
                                                                    ------------    ------------

Net change in cash and cash equivalents                                8,464,182         217,447

Cash and cash equivalents at beginning of year                         4,885,079       4,667,632
                                                                    ------------    ------------

Cash and cash equivalents at end of year                            $ 13,349,261    $  4,885,079
                                                                    ============    ============

Supplemental disclosures:
     Cash paid during the year for:
         Interest                                                   $  5,328,737    $  4,913,583
         Income taxes                                                    339,000         173,000

     Non-cash transactions
         Transfer of loans to real estate owned                     $     31,036    $         --
</TABLE>

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

          See accompanying notes to consolidated financial statements.


                                                                              6.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

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 and Scioto Counties located in Southeastern Ohio. 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 accounting
principles generally accepted in the United States of America, 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.

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

                                   (Continued)

                                                                              7.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

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 120 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 120 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.

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

                                   (Continued)

                                                                              8.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

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.

Stock-Based Compensation: Employee compensation under the stock option plan is
reported if options are granted below market price at grant date. Pro forma
disclosures of compensation cost of stock-based awards have been determined
using the fair value method that considers the time value of the option
considering the volatility of the Company's stock, expected dividend yield, and
the risk-free interest rate over the expected life of the option using a
Black-Scholes valuation model.

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.

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. Earnings per common share during 2000 reflects
the result of three calendar days of operation as a stock corporation, December
29 through December 31, 2000. Net loss during this three day period totaled
$56,357.

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

                                   (Continued)

                                                                              9.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The weighted average number of common shares outstanding for basic and diluted
earnings per share computations were as follows:

                                                            2001     2000
                                                            ----     ----
     Weighted-average shares outstanding - Basic           723,074  719,961
     Effect of stock options and non-vested stock awards        13       --
                                                           -------  -------
     Weighted-average shares outstanding - Diluted         723,087  719,961
                                                           =======  =======

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

New Accounting Pronouncements: Beginning January 1, 2001, a new accounting
standard required all derivatives to be recorded at fair value. Unless
designated as hedges, changes in these fair values are recorded in the income
statement. Fair value changes involving hedges are generally 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 Company's
financial statements, because the Company did not hold any derivatives.

In June 2001, FASB issued SFAS No. 141 "Business Combinations". SFAS No. 141
requires all business combinations within its scope to be accounted for using
the purchase method, rather than the pooling-of-interests method. The provisions
of this Statement apply to all business combinations initiated after June 30,
2001. The adoption of this statement will only have an impact on the Company's
financial statements if it enters into a business combination.

Also in June 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which addresses the accounting for such assets arising from prior and
future business combinations. Upon the adoption of this Statement, goodwill
arising from business combinations will no longer be amortized, but rather will
be assessed regularly for impairment, with any such impairment recognized as a
reduction to earnings in the period identified. Other identified intangible
assets, such as core deposit intangible assets, will continue to be amortized
over their estimated useful lives. The Company is required to adopt this
Statement on January 1, 2002. The adoption of this Statement will not have an
impact on the Company's financial statements, because the Company does not have
any intangible assets recorded.

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

                                   (Continued)

                                                                             10.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 2 - SECURITIES

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

                                     Fair      Unrealized    Unrealized
                                     Value       Gains        Losses
                                     -----       -----        ------
     2001:
     U.S. Government agencies     $10,037,072   $ 150,729    $(101,326)
     Trust preferred securities     1,008,800       5,625       (5,016)
                                  -----------   ---------    ---------

                                  $11,045,872   $ 156,354    $(106,342)
                                  ===========   =========    =========
     2000:
     U.S. Government agencies     $ 5,472,156   $   9,491    $ (43,509)
     Trust preferred securities       958,755          --      (54,470)
                                  -----------   ---------    ---------

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

Contractual maturities of securities at year-end 2001 were as follows.

                                                     Fair
                                                     Value
                                                     -----

         Due after one year through five years    $ 2,544,520
         Due after five years through ten years     7,492,552
         Due after ten years                        1,008,800
                                                  -----------

                                                  $11,045,872
                                                  ===========

Proceeds from sales of securities were $3,782,100 and $8,119,045 for 2001 and
2000. Gross gains of $20,851 were recognized on those sales in 2001. Gross
losses of $156,828 were recognized on those sales in 2000.

Securities with amortized cost of $2,738,961 and $1,187,280 at December 31, 2001
and 2000 were pledged to secure public deposits.

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

                                   (Continued)

                                                                             11.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are as follows:

                                                 December 31,
                                                 ------------
                                              2001            2000
                                              ----            ----
         1-4 family residential
           mortgage loans                $  47,069,750    $  51,297,505
         Other real estate loans             8,890,223        9,760,182
         Automobile loans                   21,476,262       17,203,767
         Mobile home loans                  16,903,860       15,803,756
         Other                               8,743,537        8,969,737
                                         -------------    -------------
                                           103,083,632      103,034,947
         Net deferred loan origination
           costs                             3,166,057        3,125,080
         Allowance for loan losses          (1,232,085)        (774,630)
                                         -------------    -------------

              Total                      $ 105,017,604    $ 105,385,397
                                         =============    =============

Activity in the allowance for loan losses is as follows:

                                            Years Ended December 31,
                                            ------------------------
                                              2001            2000
                                              ----            ----

         Beginning balance               $     774,630    $     588,725
         Provision for loan losses             692,958          295,000
         Charge-offs                          (249,988)        (119,084)
         Recoveries                             14,485            9,989
                                         -------------    -------------

         Ending balance                  $   1,232,085    $     774,630
                                         =============    =============

Impaired loans for the years ended December 31, 2001 and 2000 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:

                                              2001            2000
                                              ----            ----

         Beginning balance                   $ 492,392        $ 708,313
         New loans                             294,000          213,200
         Repayments                            (64,262)        (161,897)
         Other changes                              --         (267,224)
                                             ---------        ---------
         Ending balance                      $ 722,130        $ 492,392
                                             =========        =========

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.

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

                                   (Continued)

                                                                             12.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 4 - PREMISES AND EQUIPMENT

Office properties and equipment consisted of the following:

                                                 December 31,
                                                 ------------
                                              2001            2000
                                              ----            ----

         Land                              $ 1,041,609      $ 1,059,002
         Buildings and improvements          3,266,761        3,347,891
         Furniture and equipment             1,009,977        1,197,213
         Automobile                             17,288           17,288
                                           -----------      -----------
              Total cost                     5,335,635        5,621,394
         Accumulated depreciation           (2,020,443)      (2,168,300)
                                           -----------      -----------

                                           $ 3,315,192      $ 3,453,094
                                           ===========      ===========

NOTE 5 - DEPOSITS

Interest-bearing deposits consisted of the following:

                                                 December 31,
                                                 ------------
                                              2001            2000
                                              ----            ----

         Passbook accounts                $ 22,210,258     $ 19,567,653
         Money market and NOW accounts      14,113,291       10,038,537
         Certificates of deposit            79,007,206       72,090,982
                                          ------------     ------------

                                          $115,330,755     $101,697,172
                                          ============     ============

Certificates of deposit of greater than $100,000 were $17,363,367 and
$11,242,314 at December 31, 2001 and 2000. Deposits greater than $100,000 are
not federally insured.

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

                                          December 31,
                                              2001
                                              ----

                  2002                    $ 57,274,153
                  2003                      14,900,137
                  2004                       3,178,043
                  2005                         955,495
                  2006                         370,769
                  Thereafter                 2,328,609
                                          ------------

                                          $ 79,007,206
                                          ============

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

                                   (Continued)

                                                                             13.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 6 - FEDERAL HOME LOAN BANK (FHLB) BORROWINGS

At December 31, 2001, the Company had FHLB borrowings of $2,000,000 with a fixed
interest rate of 5.91% maturing December 27, 2002. 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 year-end 2001, the Company had letters of credit from the FHLB totaling
$10,500,000. The letters of credit are pledged by the Company to secure public
deposits. These borrowings and letters of credit were collateralized by the
Company's FHLB stock owned and $15,625,000 of qualifying mortgage loans at
December 31, 2001.

NOTE 7 - COMMITMENTS, CONTINGENCIES, CONCENTRATIONS 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,
                                                       ------------
                                               2001                   2000
                                               ----                   ----

         Fixed rate                         $  3,552,635           $  3,137,840
         Variable rate                         2,260,523              1,218,896
                                            ------------           ------------
                                            $  5,813,158           $  4,356,736
                                            ============           ============

         Range of interest rates on
           commitments                    4.75% to 16.80%        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.

At December 31, 2001, the Company had $8,225,920 in demand deposits due from the
Federal Home Loan Bank of Cincinnati.

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

                                   (Continued)

                                                                             14.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 7 - COMMITMENTS, CONTINGENCIES, CONCENTRATIONS AND
  FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (Continued)

The Company is, from time to time, involved in various lawsuits and claims that
arise in the normal course of business. In the opinion of management, any
liability that may result from these lawsuits and claims will not materially
affect the financial position or results of operations of the Company.

NOTE 8 - 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, 2001 and 2000 totaled $33,034 and
$27,126.

Employee Stock Ownership Plan: Employees participate in an Employee Stock
Ownership 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. Participants receive the shares
at the end of employment.

Contributions to the ESOP during 2001 and 2000 were $90,373 and $89,787. Expense
for 2001 and 2000 was $89,590 and $68,200.

Shares held by the ESOP at December 31, 2001 and 2000 were as follows:

                                                    December 31,
                                                    ------------
                                               2001               2000
                                               ----               ----

         Allocated to participants              12,400            6,200
         Unearned                               49,666           55,866
                                              --------         --------

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

         Fair value of unearned shares        $717,674         $614,526
                                              --------         --------

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

                                   (Continued)

                                                                             15.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 8 - EMPLOYEE BENEFITS (Continued)

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 $40,322 and $36,115
for the years ended December 31, 2001 and 2000.

Stock-Based Incentive Plan: On July 5, 2001, the shareholders approved the
Lawrence Financial Holdings, Inc. 2001 Stock-Based Incentive Plan (the "Plan").
The Plan authorized the granting of up to 77,582 shares of common stock as
options and 31,033 shares of common stock as restricted stock awards. On
December 31, 2001, the Board of Directors granted options to purchase 58,187
shares of common stock at an exercise price equal to the market value (as
defined in the Plan) to certain employees, officers and directors of the
Company. One-fifth of the options awarded become exercisable on each of the four
anniversaries of the date of grant; the first fifth became exercisable on the
grant date. The option period expires 10 years from the date of grant.

Following is a summary of stock option plan activity during 2001:

                                                                   Weighted
                                                                    Average
                                           Available    Options    Exercise
                                           For Grant  Outstanding    Price
                                           ---------  -----------    -----

         Balance at beginning of year           --          --           --
         Authorized                         77,582          --           --
         Granted                           (58,187)     58,187     $  14.45
                                           -------      ------
         Balance at end of year             19,395      58,187     $  14.45
                                           =======      ======

         Options exercisable at year-end                11,640     $  14.45

At December 31, 2001, the 58,187 options outstanding had a weighted average
remaining contractual life of 10 years.

The options granted on December 31, 2001 have an exercise price of $14.45 and
expire in December 2011. The fair value of options granted in 2001 was estimated
using the Black-Scholes option pricing model using the following assumptions:
Risk-free interest rate of 4.49%, expected life of 5 years, expected volatility
of stock price of 27.24% and expected dividend yield of 1.94%. Based on these
assumptions, the estimated fair value of options granted in 2001 was $3.77 per
option.

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

                                   (Continued)

                                                                             16.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 8 - EMPLOYEE BENEFITS (Continued)

The following pro forma information presents net income and earnings per common
share had the fair value of the options been used to measure compensation cost
for the stock option plan.

                                                          2001         2000
                                                          ----         ----

         Reported net income                           $   576,081  $   422,304
         Pro forma net income                              575,961      422,304

         Reported earnings (loss) per common share:
              Basic                                    $      0.80  $     (0.08)
              Diluted                                         0.80        (0.08)

         Pro forma earnings (loss) per common share:
              Basic                                    $      0.80  $     (0.08)
              Diluted                                         0.80        (0.08)

Restricted stock awards are used as a means of providing directors and certain
key employees of the Company with an ownership interest in the Company in a
manner designed to compensate such directors and key employees for services to
the Company.

On December 31, 2001, the Board of Directors awarded 23,283 shares of restricted
stock to outside directors and certain officers of the Company. No shares had
been previously awarded. One-fifth of such shares are earned and become
nonforfeitable on each of the first four anniversaries of the date of the award.
At December 31, 2001, 4,663 shares have vested. In the event of the death or
disability of a participant or a change in control of the Company, however, the
participant's shares will be deemed earned and nonforfeitable upon such date. At
December 31, 2001, there were 7,750 shares reserved for future awards.
Compensation expense related to restricted share awards is based upon the cost
of the shares, which approximates fair value at the date of grant. For the year
ended December 31, 2001, compensation expense totaled $67,380.

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

                                   (Continued)

                                                                             17.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 9 - INCOME TAXES

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

                                                    December 31,
                                                    ------------
                                               2001               2000
                                               ----               ----

         Current                             $ 434,368        $ 242,283
         Deferred                             (198,886)         (69,921)
                                             ---------        ---------

                                             $ 235,482        $ 172,362
                                             =========        =========

The sources of gross deferred tax assets and liabilities are as follows:

                                                       December 31,
                                                       ------------
                                                    2001         2000
                                                    ----         ----
         Total deferred tax assets
             Allowance for loan losses           $ 418,909    $ 234,145
             Deferred compensation                 116,766      101,795
             Net unrealized loss on securities
               available for sale                       --       30,086

         Total deferred tax liabilities
             FHLB stock dividends                 (118,822)    (105,936)
             Deferred loan fees/cost               (30,325)     (37,117)
             Net unrealized gain on securities
                available for sale                 (17,004)          --
             Accrued ESOP                           (1,947)          --
             Depreciation                          (10,976)     (18,168)
                                                 ---------    ---------

                Net deferred tax asset           $ 356,601    $ 204,805
                                                 =========    =========

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

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

                                   (Continued)

                                                                             18.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 9 - INCOME TAXES (Continued)

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,
                                              ---------------------------------------
                                                     2001                 2000
                                              ----------------       ----------------
                                               Amount     Rate       Amount     Rate
                                               ------     ----       ------     ----
<S>                                           <C>         <C>       <C>         <C>
         Tax expense at statutory rate        $ 275,932   34.0%     $ 202,661   34.0%
         Net earnings of insurance
           contracts                            (35,682)  (4.4)       (16,109)  (2.7)
         Tax-exempt interest income             (12,777)  (1.6)       (10,201)  (1.7)
         Other                                    8,009    1.0         (3,989)  (0.6)
                                              ---------   ----      ---------   ----

              Tax expense at effective rate   $ 235,482   29.0      $ 172,362   29.0%
                                              =========   ====      =========   ====
</TABLE>

Retained earnings at December 31, 2001 and 2000 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, 2001 and
2000 was $507,770 for both years.

NOTE 10 - 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, 2001 and 2000,
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.

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

                                   (Continued)

                                                                             19.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 10 - 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, 2001:
------------------
Total capital (to risk-
  weighted assets)               $   14,467       14.58%    $    7,936         8.0%       $     9,921       10.0%
Tier 1 (core) capital (to
  risk-weighted assets)          $   13,212       13.32%    $    3,968         4.0%       $     5,952        6.0%
Tier 1 (core) capital (to
  adjusted total assets)         $   13,212        9.82%    $    5,381         4.0%       $     6,726        5.0%

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%
</TABLE>

Regulations of the Office of Thrift Supervision (OTS) provide that the Bank may
make a capital distribution after notifying the OTS and not receiving an
objection within the designated time period 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.
Capital distributions that are not eligible for the OTS notice process require
prior approval from the OTS.

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 13).

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

                                   (Continued)

                                                                             20.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Estimated fair values and the related carrying values of the Company's financial
instruments at yearend are as follows:

<TABLE>
<CAPTION>
                                                         2001                                2000
                                                         ----                                ----
                                              Carrying             Fair            Carrying            Fair
                                               Value               Value             Value             Value
                                               -----               -----             -----             -----
<S>                                      <C>                <C>               <C>               <C>
    Financial assets
       Cash and cash equivalents         $    13,349,261    $    13,349,000   $     4,885,079   $    4,885,000
       Securities available for sale          11,045,872         11,046,000         6,430,911        6,431,000
       Loans, net                            105,017,604        108,495,000       105,385,397      105,356,000
       Federal Home Loan Bank
         stock                                   587,000            587,000           549,100          549,000
       Accrued interest receivable               797,483            797,000           815,816          816,000
    Financial liabilities
       Deposits                             (116,795,884)      (117,722,000)     (103,106,585)    (103,394,000)
       Federal Home Loan Bank
         advances                             (2,000,000)        (2,066,000)       (5,000,000)      (5,000,000)
       Accrued interest payable                  (18,077)           (18,000)          (41,505)         (42,000)
</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, 2001 and 2000, 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, 2001 and 2000, 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, 2001 and 2000 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,
2001 and 2000, 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, 2001 and 2000 should not
necessarily be considered to apply at subsequent dates. 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.

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

                                   (Continued)

                                                                             21.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 12 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION

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

                            CONDENSED BALANCE SHEETS
                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                 2001          2000
                                                                 ----          ----
<S>                                                          <C>           <C>
     Assets
         Cash and cash equivalents                           $ 2,052,022   $ 2,233,281
         Investment in subsidiary                             13,244,985    12,938,260
         Loan receivable from ESOP                               490,933       530,873
                                                             -----------   -----------
                Total assets                                 $15,787,940   $15,702,414
                                                             ===========   ===========
     Liabilities
         Accrued expenses and other liabilities              $     9,642   $   762,469

     Shareholders' equity                                     15,778,298    14,939,945
                                                             -----------   -----------
                Total liabilities and shareholders' equity   $15,787,940   $15,702,414
                                                             ===========   ===========
</TABLE>

                         CONDENSED STATEMENTS OF INCOME
                    For the year ended December 31, 2001 and
             the period December 29, 2000 through December 31, 2000

<TABLE>
<CAPTION>
                                                                 2001          2000
                                                                 ----          ----
<S>                                                          <C>           <C>
     Interest income                                         $    96,033   $     5,884
     Dividends from subsidiary bank                              540,000            --
                                                             -----------   -----------
     Income before income taxes and equity in
     undistributed earnings of subsidiary bank                   636,033         5,884

     Equity in undistributed earnings of subsidiary bank         125,725       (60,241)
                                                             -----------   -----------
     Total Income                                                761,758       (54,357)

     Non-Interest Expenses                                       231,857            --
                                                             -----------   -----------
     Income (loss) before income taxes                           529,901       (54,357)
     Provision for (benefit from) income taxes                   (46,180)        2,000
                                                             -----------   -----------

     Net income (loss)                                       $   576,081   $   (56,357)
                                                             ===========   ===========
</TABLE>

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

                                   (Continued)

                                                                             22.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 12 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS
                    For the year ended December 31, 2001 and
             the period December 29, 2000 through December 31, 2000

<TABLE>
<CAPTION>
                                                                            2001           2000
                                                                            ----           ----
<S>                                                                     <C>            <C>
Cash flows from operating activities
     Net income (loss)                                                  $   576,081    $   (56,357)
     Adjustments to reconcile net income to net cash from
       operating activities
         Equity in undistributed (earnings) losses of subsidiary bank      (125,725)        60,241
         MRP expense                                                         67,380             --
         Net change in accrued expenses and other liabilities              (684,627)       696,269
                                                                        -----------    -----------
              Net cash from operating activities                           (166,891)       700,153

Cash flows from investing activities
     Origination of loan receivable from ESOP                                    --       (620,660)
     Repayment on loan receivable from ESOP                                  39,940         89,787
     Purchase of stock in subsidiary bank                                        --     (5,000,000)
                                                                        -----------    -----------
              Net cash from investing activities                             39,940     (5,530,873)

Cash flows from financing activities
     Proceeds from issuance of common stock,
     net of conversion costs                                                     --      7,064,001
     Payment of dividends                                                   (54,308)            --
                                                                        -----------    -----------
              Net cash from financing activities                            (54,308)     7,064,001
                                                                        -----------    -----------

     Net change in cash and cash equivalents                               (181,259)     2,233,281

Cash and cash equivalents at beginning of period                          2,233,281             --
                                                                        -----------    -----------

Cash and cash equivalents at end of period                              $ 2,052,022    $ 2,233,281
                                                                        ===========    ===========
</TABLE>

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 10).

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

                                   (Continued)

                                                                             23.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

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

NOTE 13 - 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 of the Bank,
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 10.

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

NOTE 14 - STOCK REPURCHASE AND CASH DIVIDEND

On January 22, 2002, the Company declared a dividend of $0.07 a share to
shareholders of record on February 28, 2002, payable on March 22, 2002. Also,
the Company has announced a stock repurchase plan for up to 12% of the
outstanding stock of the Company.

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


                                                                             24.