SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                         ---------------------------

                                  FORM 10-KSB

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

         For the year ended December 31, 1999

                                      OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                           Commission File Number:  0-28934

                             EMPIRE FEDERAL BANCORP, INC.
------------------------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

          Delaware                                                 81-0512374
-------------------------------------------               --------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization                            Identification No.)

123 South Main Street, Livingston, Montana                            59047
-------------------------------------------                        ----------
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code:  (406) 222-1981
                                                     --------------

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 $0.01 per share
                     ---------------------------------------
                                 (Title of Class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
                                                   ---    ---

     Indicate by check mark whether disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
other information statements incorporated by reference in Part III of this
Form 10-KSB or any amendments to this Form 10-KSB.  YES  x   NO
                                                        ---     ---

     The aggregate market value of the voting stock held by nonaffiliates of
the Registrant, based on the closing sales price of the Registrant's Common
Stock as quoted on the Nasdaq National Market System under the symbol "EFBC"
on March 13, 2000, was $20,221,579 (1,817,670 shares at $11.125 per share).
It is assumed for purposes of this calculation that none of the Registrant's
officers, directors and 5% stockholders are affiliates.

     The Registrant's revenues for the year ended December 31, 1999 were
$8,521,868.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.  Portions of Annual Report to Stockholders for the year ended December 31,
    1999 (Parts I and II)
2.  Portions of the Proxy Statement for the Annual Meeting of Stockholders
    (Part III)

Transitional Small Business Disclosure Format (check one)  Yes     No  X
                                                               ---    ---
<PAGE>


                                   PART I

Item 1.  Business
-----------------

     Empire Federal Bancorp, Inc. (the "Corporation"), a Delaware corporation,
was incorporated on September 20, 1996 for the purpose of becoming the holding
company for Empire Federal Savings Bank ("Empire Federal" or the "Bank") (the
Corporation and Empire Federal shall at times be referred to as the
"Corporation") upon Empire Federal's conversion from a federal mutual stock
savings and loan association to a federal stock bank ("Conversion").  The
Conversion was completed on January 23, 1997.  At December 31, 1999, the
Corporation had total assets of $114.5 million, total deposits of $71.4
million and stockholders' equity of $32.8 million.  The Corporation has not
engaged in any significant activity other than holding the stock of Empire
Federal.  Accordingly, the information set forth in this report, including
financial statements and related data, relates primarily to Empire Federal.

     Empire Federal was organized in 1923 as a Montana-chartered mutual
building and loan association under the name "Empire Building and Loan
Association."  In 1970, the Bank converted to a federal charter and adopted
the name "Empire Federal Savings and Loan Association of Livingston."  In
connection with the Conversion, the Bank adopted its current corporate title.
The Bank's deposits are federally insured by the Federal Deposit Insurance
Corporation ("FDIC") under the Savings Association Insurance Fund ("SAIF").
The Bank is a member of the Federal Home Loan Bank ("FHLB") System.

     The Bank is a community oriented financial institution which has
traditionally offered a variety of savings products to its retail customers
while concentrating its lending activities on the origination of loans secured
by one- to four- family residential dwellings.  The Bank considers Gallatin,
Park and Sweet Grass counties in south-central Montana as its primary market
area.  During 1999, the Bank received regulatory approval to open a de novo
branch in Billings, Montana, and management expects to open the new branch in
April 2000.  Lending activities also have included the origination of multi-
family, commercial, business, commercial real estate and home equity loans.
The Bank's primary business has been that of a traditional financial
institution, originating loans in its primary market area for its portfolio.
In addition, the Bank has maintained a significant portion of its assets in
investment and mortgage-backed securities.  Similar to its lending activities,
the Bank's investment portfolio has been weighted toward U.S. Government
agency mortgage-backed securities secured by one- to four- family residential
properties.  The portfolio also includes U.S. Government agency securities.
Investment securities, including mortgage-backed securities and FHLB stock,
totaled $49.0 million, or 42.8% of total assets, at December 31, 1999.  In
addition to interest and dividend income on loans and investments, the Bank
receives other income from the sale of insurance products through its wholly-
owned subsidiary, Dime Service Corporation.

     As evidenced by the new branch in Billings and an increase in commercial
and business loans in 1999, the Corporation's strategy is changing from its
historical role as a mortgage lender to a growth-oriented expansion strategy
by pursuing internal and external growth opportunities, when appropriate.
This new strategy may subject the Corporation to a greater degree of risk.
Risks associated with this new business strategy include increased risk of
losses on loans, provision for loan losses which exceed historical levels,
provision for loan losses which exceed historical levels, difficulties in
integrating or managing new branches or acquired institutions and problems
related to the management of growth.  There can be no assurance that the
Corporation will be successful in implementing this new business strategy or
in managing growth.  For further information regarding the segments of the
Corporation's business, see Note 18 of the Notes to Consolidated Financial
Statements in the Annual Report incorporated herein by reference.

                                       1
<PAGE>

     Loan Portfolio Analysis.  The following table sets forth the composition
of the Bank's loan portfolio as of the dates indicated.  The Bank had no
concentration of loans of a given category exceeding 10% of total gross loans
other than as set forth below.

                                                 At December 31,
                                 -------------------------------------------
                                       1999                    1998
                                 -----------------        ------------------
                                  Amount  Percent         Amount    Percent
                                  ------  -------         ------    -------
                                             (Dollars in Thousands)

 One- to four-family...........  $41,724    67.99%       $39,941     79.51%
 Multi-family..................    5,308     8.65          4,731      9.42
 Commercial real estate........    7,108    11.58          2,227      4.43
 Commercial....................    1,789     2.92             --        --
 Consumer......................    2,546     4.15          2,595      5.17
 Share loans...................      486      .78            474       .94
 Construction..................    2,409     3.93            265       .53
                                 -------   -------       -------    ------
   Total.......................   61,370   100.00%        50,233    100.00%
                                           ======                   ======
  Less:
   Loans in process............    1,224                     208
   Deferred loan origination
    fees and costs.............      350                     306
   Allowance for loan losses...      226                     220
                                 -------                 -------
     Total loans, net..........  $59,570                 $49,499
                                 =======                 =======

     Permanent Residential One- to Four-Family Mortgage Loans.  Historically,
the primary lending activity of the Bank has been the origination for
portfolio of permanent residential one- to four-family first mortgage loans.
Management believes that this policy of focusing on single-family residential
mortgage loans has been successful in contributing to interest income while
keeping delinquencies and losses to a minimum.  At December 31, 1999, $41.7
million, or 67.99%, of the Bank's total loan portfolio, before net items,
consisted of permanent residential one- to four-family mortgage loans, with an
average balance of $61,000.

     The Bank presently originates for its portfolio fixed-rate mortgage loans
secured by non-owner occupied one-to four family properties with terms of up
to 20 years and up to 30 years for owner-occupied residential properties.  At
December 31, 1999, $40.3 million, or 65.61% of the total loans before net
items were fixed rate one- to four-family loans and $1.4 million, or 2.38%,
were adjustable rate mortgage ("ARM") loans.  The Bank has offered two ARM
loan products for portfolio which adjust annually subject to a limitation on
the annual increase of 1.5% to 2.0% and an overall limitation of 5.0% or to a
specific ceiling rate. These ARM products utilize either the OTS Monthly
Median Cost of Funds Index or the Semi-Annual Cost of Funds

                                       2
<PAGE>

Index ("COFI").  Loans based on COFI constitute a majority of the Bank's ARM
loans.  The COFI is a lagging model index which, together with the periodic
and overall interest rate caps, may cause the yield on such loans to adjust
more slowly than the cost of interest-bearing liabilities especially in a
rapidly rising rate environment.

     The Bank's ARM loans do not permit negative amortization of principal and
carry no prepayment restrictions.  Borrower demand for ARM loans versus
fixed-rate mortgage loans is a function of the level of interest rates, the
expectations of changes in the level of interest rates and the difference
between the initial interest rates and fees charged for each type of loan.
The relative amount of fixed-rate mortgage loans and ARM loans that can be
originated at any time is largely determined by the demand for each in a
competitive environment.

     ARM loans help reduce the Bank'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 customer.  It is
possible that during periods of rising interest rates the risk of default on
ARM loans may increase as a result of repricing with increased costs to the
borrower.  Another consideration is that although ARM loans allow the Bank to
increase the sensitivity of its asset base to changes in the interest rates,
the extent of this interest sensitivity is limited by the periodic and
lifetime interest rate adjustment limits.  Because of these considerations,
the Bank has no assurance that yields on ARM loans will be sufficient to
offset increases in the Bank's cost of funds.

     The Bank's lending policies generally limit the maximum loan-to-value
ratio on mortgage loans secured by owner occupied properties to 80% of the
lesser of the appraised value or the purchase price, however, most loans have
loan-to-value ratios of 75% or less.  Appraisals are obtained on all
properties and are made by independent fee appraisers approved by the Board of
Directors.

     The Bank offers fixed-rate, permanent owner-occupied  one- to four-family
mortgage loans with terms of up to 30 years.  Substantially all permanent one-
to four-family loans have original contractual terms to maturity of 20 to 25
years and are primarily made for loan amounts of less than $250,000.  Such
loans generally are amortized monthly with principal and interest due each
month and customarily include "due-on-sale" clauses.  The Bank enforces due-
on-sale clauses to the extent permitted under applicable laws.  Substantially
all of the Bank's mortgage loan portfolio consists of conventional loans.  The
Bank has not originated significant amounts of mortgage loans on second
residences.

     The Bank also originates residential mortgage loans secured by non-owner
occupied rental properties within its primary market area.  Generally, such
loans are made at higher interest rates than owner-occupied residential
mortgage loans, with a loan-to-value ratio of 70%, and with a debt coverage
ratio of 1.25x.

     The Bank requires title insurance on all real estate secured loans.   The
Bank also requires that fire and extended coverage casualty insurance or
homeowners insurance (and, if appropriate, flood insurance) be maintained in
an amount at least equal to the outstanding loan balance.

     Construction Loans.  The Bank originates construction loans primarily for
the construction of single-family residences and multi-family properties.
Construction loans generally convert to a permanent loan upon the completion
of construction.  Construction loans generally begin to amortize as permanent
mortgage loans after the construction period (typically six months) is
completed, unless extended.  At December 31, 1999, construction loans amounted
to $2.4 million, or 3.93%, of the Bank's total loan portfolio, before net
items as compared to $265,000 or .53% at December 31, 1998.  Included in this
balance is a construction loan of $1.2 million for a hotel renovation.
Construction loans have rates and terms which generally match the non-
construction loans then offered by the Bank, except that during the
construction phase, the borrower pays only interest on the loan.  The borrower
is qualified at the interest rate for the permanent loan.  The Bank's
construction loan agreements generally provide that loan proceeds are
disbursed in increments as construction progresses.  The Bank periodically
reviews the progress of the underlying

                                       3
<PAGE>

construction project.  Construction lending is generally limited to the Bank's
primary lending areas and is underwritten pursuant to the same general
guidelines used for originating permanent one- to four-family loans.
Construction financing is generally considered to involve a higher degree of
risk of loss than financing on improved, owner-occupied real estate because of
the uncertainties of construction and the possibility of costs exceeding the
initial estimates.

     Multi-Family and Commercial Real Estate Lending.  The Bank also
originates loans secured by multi-family and commercial real estate.  At
December 31, 1999, the Bank's loan portfolio included $5.3 million in multi-
family loans and $7.1 million in commercial real estate loans as compared to
$4.7 million and $2.2 million respectively at December 31, 1998.

     Multi-family and commercial real estate lending affords the Bank an
opportunity to receive interest at rates higher than those generally available
from one- to four-family residential lending.  However, loans secured by such
properties are generally greater in amount, 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
commercial real estate and multi-family properties are often dependent on the
successful operation and management of the properties, repayment of such loans
may be influenced by adverse conditions in the real estate market or the
economy.

     Multi-family and commercial real estate loans originated by the Bank are
predominately fixed-rate loans with terms to maturity of 15 to 20 years.  The
Bank's commercial real estate portfolio consists of loans on a variety of
properties located in the Bank's primary market area, including office
buildings and churches.  Multi-family loans generally are secured by small to
medium-sized apartment buildings.  Appraisals on properties, which secure
multi-family and commercial real estate loans, are performed by an independent
appraiser engaged by the Bank before the loan is made.  Underwriting of
commercial and multi-family loans includes a thorough analysis of the cash
flows generated by the real estate to support the debt service and the
financial resources, experience, and income level of the borrowers.  The Bank
imposes a debt coverage ratio of 1.25x to ensure that the property securing
the loans will generate sufficient cash flow to adequately cover operating
expenses and debt service payments plus provide an acceptable return to the
investor.  Operating statements on each multi-family and commercial real
estate loan are required and reviewed by management on an annual basis.

     At December 31, 1999, the average loan balance of the Bank's multi-family
loans was $279,000.  At December 31, 1999, the Bank had five multi-family
loans with two borrowers with an aggregate balance of $2.3 million, and the
Bank had one commercial loan in excess of $250,000 which is a loan
collaterized by a motel for $1.4 million.  All of the properties securing
multi-family loans are located in the Bank's primary market area with the
exception of one participation loan on a property located in California with a
balance at December 31, 1999 of $310,000.

     Consumer Lending.  The Bank's consumer loan portfolio consists primarily
of home equity, home improvement, share loans and, to a substantially lesser
extent, mobile home and automobile loans.  At December 31, 1999 the Bank's
consumer loans totalled approximately $3.0 million, or 4.93%, of the Bank's
gross loans of which $2.3 million, or 3.72%, consisted of home equity and home
improvement loans.

     Consumer loans are made at fixed interest rates and for varying terms.
Home equity and home improvement loans are made for terms up to 15 years for
owner occupied residences.  In the case of home equity loans, the Bank holds a
second mortgage behind its own or another financial institution's first
mortgage.  When originating a home equity loan, the Bank accounts for both the
first and second mortgage liens and generally limits the loan-to-value ratio
to 80%.

     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 and other vehicles.  In such cases,
any repossessed collateral for a defaulted consumer loan may not provide an
adequate source of

                                       4
<PAGE>

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.  Furthermore, the application of various
federal and state laws, including federal and state bankruptcy and insolvency
laws, may limit the amount that can be recovered on such loans.

     Commercial Business Lending.  During 1999, the Bank began to offer
commercial loans to its customers.  The Bank's commercial business lending
activities focuses primarily on small to medium size business owned by
individuals well known to the Bank and who reside in the Bank's primary market
area.  At December 31, 1999, commercial business loans amounted to $1.8
million, or 2.92% of total loans.

     Commercial business loans may be unsecured loans, but generally are
secured by various types of business collateral other than real estate (i.e.,
inventory, equipment, etc.).  In many instances, however, such loans are often
also secured by junior liens on real estate.  Commercial business loans are
either lines of credit or term loans.  Lines of credit are generally renewable
and made for a one-year term.  Lines of credit are generally variable rate
loans indexed to the prime rate.  Term loans are generally originated with
three to five year maturities, with a maximum of seven years, on a fully
amortizing basis.  As with commercial real estate loans, the Bank generally
requires annual financial statements from its commercial business borrowers
and, if the borrower is a corporation, personal guarantees from the
principals.

     Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential, commercial and multi-family real estate lending.
Real estate lending is generally considered to be collateral based lending
with loan amounts based on predetermined loan to collateral values and
liquidation of the underlying real estate collateral is viewed as the primary
source of repayment in the event of borrower default.  Although commercial
business loans are often collateralized by equipment, inventory, accounts
receivable or other business assets, the liquidation of collateral in the
event of a borrower default is often not a sufficient source of repayment
because accounts receivable may be uncollectible and inventories and equipment
may be obsolete or of limited use, among other things.  Accordingly, the
repayment of a commercial business loan depends primarily on the
creditworthiness of the borrower (and any guarantors), while liquidation of
collateral is a secondary and often insufficient source of repayment.

     At December 31, 1999, one commercial line of credit amounting to $464,000
was 30 days delinquent.  Management does not anticipate any loss on this
credit.

                                       5
<PAGE>

<TABLE>

     Maturity of Loan Portfolio.  The following table sets forth the maturity of the Bank's loan portfolio
at December 31, 1999.  The table does not include prepayments of scheduled principal repayments.  All loans
are shown as maturing based on contractual maturities.

                                                    Commercial                         Consumer
                               1-4         Multi-     Real        Con-      Comm-      and
                               Family      family     Estate    struction   ercial     Share      Total
                               -------     ------     ------    ---------   ------     -----      -----
                                                             (In Thousands)

<S>                            <C>         <C>        <C>        <C>        <C>        <C>        <C>
  Amounts Due:
  Within 3 months............. $    14     $   --     $   --     $  670     $   40     $  146     $   870
      3 months to 1 year......     377         --         31      1,739        682        266       3,095

  After 1 year:
      1 to 3 years...........      168        905      1,813         --        834        592       4,312
      3 to 5 years...........    1,430        186      3,323         --        198        364       5,501
      5 to 10 years..........    6,304      1,812      1,728         --         35        586      10,465
      10 to 20 years.........   22,316      2,405        213         --         --        909      25,843
      Over 20 years..........   11,115         --         --         --         --        169      11,284
                               -------     ------     ------     ------     ------     ------     -------
  Total due after one year...   41,333      5,308      7,077         --      1,067      2,620      57,405
                               -------     ------     ------     ------     ------     ------     -------
  Total amount due...........  $41,724     $5,308     $7,108     $2,409     $1,789     $3,032      61,370
  Less:                        =======     ======     ======     ======     ======     ======
   Allowance for loan loss...                                                                         226
   Loans in process..........                                                                       1,224
   Deferred loan fees........                                                                         350
                                                                                                  -------
  Loans receivable, net......                                                                     $59,570
                                                                                                  =======

</TABLE>

<TABLE>

     The following table sets forth the dollar amount of all loans due after December 31, 1999, which have
fixed interest rates and have floating or adjustable interest rates.

                                                   Fixed-     Floating- or
                                                   Rates    Adjustable-Rates     Total
                                                   -----    ----------------     -----
                                                             (In Thousands)

<S>                                               <C>           <C>            <C>
One- to four-family......................         $40,267        $1,457        $41,724
Multi-family.............................           4,729           579          5,308
Commercial Real Estate...................           5,502         1,606          7,108
Construction.............................           2,409            --          2,409
Commercial...............................             366         1,423          1,789
Consumer and share.......................           2,648           384          3,032
                                                  -------        ------        -------
    Total................................         $55,921        $5,449        $61,370
                                                  =======        ======        =======

                                                         6
</TABLE>
<PAGE>

     Scheduled contractual principal repayments of loans as presented in the
preceding table do not reflect the actual life of such assets.  The average
life of loans ordinarily is substantially less than their contractual terms
because of prepayments.  In addition, due-on-sale clauses on loans generally
give the Bank the right to declare loans immediately due and payable in the
event, among other things, that the borrower sells the real property subject
to the mortgage and the loan is not repaid.  The average life of mortgage
loans tends to increase, however, when current mortgage loan market rates are
higher than rates on existing mortgage loans and, conversely, decrease when
rates on existing mortgage loans are higher than current mortgage loan market
rates.

     Loan Solicitation and Processing.  Real estate loan customers are
solicited through advertising media and contacts with local real estate
brokers.  Upon receipt of a loan application from a prospective borrower, a
credit report and other data are obtained to verify specific information
relating to the loan applicant's employment, income and credit standing.  All
of the Bank's lending is subject to its written nondiscriminatory underwriting
standards, loan origination procedures and lending policies prescribed by the
Bank's Board of Directors.

     All loans over $350,000 must be approved by the Bank's Loan Committee,
which consists of any three members of the Board of Directors.  Interest rates
are subject to change if the approved loan is not closed within the time of
the commitment.  Because the Bank originates loans for its own portfolio, many
of the loans do not comply with all secondary market documentation criteria.
This practice has enabled the Bank to develop an expedited loan application
and approval process which management believes provides it with a competitive
advantage in its primary market area while continuing to maintain its
underwriting standards.  Management of the Bank also believes its local
decision-making capabilities is an attractive quality to customers within its
market area.  The Bank's loan approval process allows loans to be approved and
closed in approximately four weeks or less.

     Loan Commitments.   Loan commitments typically contain a termination date
of 30 days from the date of the commitment letter that is issued at the time
the loan is approved.  The Bank had outstanding loan commitments of
approximately $5.8 million at December 31, 1999, most of which were for fixed
rate/single maturity payment loans.

     Loan Originations, Sales and Purchases.  During the year ended December
31, 1999, the Bank's total gross loan originations were $25.5 million.

     The Bank has occasionally originated or participated in loans secured by
properties outside the State of Montana.  These properties are primarily
located in California but also include loans secured by one to four-family
properties in Massachusetts, New Mexico, Arizona and Colorado.  At December
31, 1999, these loans amounted to $1.1 million and consisted of (i) $475,000
in permanent residential one- to four-family mortgage loans, (ii) $348,000 in
multi-family loans, and (iii) a participation interest in a commercial real
estate loan for $310,000.  The Bank has  purchased loan participation
interests primarily during periods of reduced loan demand in its market area.
At December 31, 1999, the Bank had five participations in its primary market
area with a balance of $197,000.  Any such purchases are made in conformance
with the Bank's underwriting standards.  The Bank may decide to purchase
additional loans outside its market area in the future depending upon the
demand for mortgage credit in its market area, however, it has not purchased
any participation interests outside of its primary market area during the past
five years.

     Historically, the Bank has been a portfolio lender, maintaining the
residential mortgage loans it originates in its portfolio rather than selling
them in the secondary market.  Subject to market conditions, management
anticipates that the new branch in Billings will utilize and expand sales of
mortgage loans in the secondary market during the year 2000.

                                       7
<PAGE>

     The following table sets forth the Bank's originations and loan sales and
principal repayments during the periods indicated.  Predominately all mortgage
loan originations during the periods indicated were fixed-rate loans.

                                            Year Ended December 31,
                                           -------------------------
                                            1999               1998
                                            ----               ----
                                                 (In Thousands)
  Total gross loans receivable at
    beginning of period....... .......     $50,233           $48,313

  Loans originated:
   One- to four-family................       9,027            12,964
   Multi-family.......................       1,809               480
   Construction.......................       4,762             1,108
   Commercial real estate.............       7,158             1,550
   Commercial.........................       1,443                --
   Consumer...........................       1,299             1,063
                                           -------           -------
     Total loans originated...........      25,498            17,165

  Loans sold:
   Whole loans........................          --                --
   Participations sold................          --                --
                                           -------           -------
     Total loans sold.................          --                --
                                           -------           -------

  Loan principal repayments...........     (14,361)          (15,245)
                                           -------           -------
  Net loan activity...................      11,137             1,920
                                           -------           -------
     Total gross loans receivable
      at end of period................     $61,370           $50,233
                                           =======           =======

     Loan Origination and Other Fees.  The Bank charges loan origination fees,
which are a percentage of the principal amount of the mortgage loan.  The
amount of fees charged by the Bank is generally up to 1% for mortgage loans
and 2% for construction loans.  The Bank generally does not charge fees for
home equity loans.  Current accounting standards require that origination fees
received (net of certain loan origination costs) be deferred and amortized
into interest income over the contractual life of the loan.  Net deferred fees
or costs associated with loans that are prepaid are recognized as income at
the time of prepayment.  The Bank had $350,000 in net deferred loan fees at
December 31, 1999.

     Non-Performing Assets and Delinquencies.  When a mortgage loan borrower
fails to make a required loan payment when due, the Bank institutes collection
procedures.  All loan payments are due on the contractual due date, however, a
loan is not considered delinquent and collection procedures are not instituted
until after the 30th day of the contractual due date.  The Bank does not
charge its borrowers late penalty fees on payments made after the contractual
due date because the Bank charges daily interest on the outstanding loan
balance.  The first notice is mailed to the borrower 30 days after the
contractual due date and, if necessary, a second written notice follows within
30 days thereafter giving the borrower 15 days to respond and correct the
delinquency.  Attempts to contact the borrower by telephone generally begin
soon after the first notice is mailed to the borrower.  If a satisfactory
response is not obtained, continuous follow-up contacts are attempted until
the loan has been brought current or foreclosure is initiated.  Attempts to
interview the borrower, preferably in person, are made to establish (i) the
cause of the delinquency, (ii) whether the cause is temporary, (iii) the
attitude of the borrower toward the debt, and (iv) a mutually satisfactory
arrangement for curing the default.

                                       8
<PAGE>

     After such attempts have been made by the Bank, or sooner if the borrower
is chronically delinquent and all reasonable means of obtaining payment on
time have been exhausted, foreclosure is initiated according to the terms of
the security instrument and applicable law.  Interest income on loans is then
reduced by the full amount of accrued and uncollected interest.

     When a consumer loan borrower fails to make a required payment on a
consumer loan by the payment due date, the Bank institutes the same collection
procedures as for its mortgage loan borrowers.

     The Bank's Board of Directors is informed monthly as to the status of all
loans that are delinquent more than 30 days, the status on all loans currently
in foreclosure, and the status of all foreclosed and repossessed property
owned by the Bank.

     Except for one nonaccrual loan amounting to $14,000, the Bank did not
have any nonaccrual loans, accruing loans contractually past due 90 days or
more as to principal or interest payments, or troubled debt restructurings
within the meaning of Statement of Financial Accounting Standards, ("SFAS")
No. 15 at December 31, 1999 and 1998.  Loans amounting to $782,000 and $1.1
million were past due, but still accruing at December 31, 1999 and 1998,
respectively.

     Real Estate Owned.  The Bank had no real estate acquired through
foreclosure or in satisfaction of loans at December 31, 1999 or 1998.

     Asset Classification.  The OTS has adopted various regulations regarding
problem assets of savings institutions.  The regulations require that each
insured institution review and classify its assets on a regular basis.  In
addition, in connection with examinations of insured institutions, OTS
examiners have authority to identify problem assets 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 may 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.  All or a portion of general loan loss allowances established to cover
possible losses related to assets classified substandard or doubtful may 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" and are
monitored by the Bank.

     At December 31, 1999, the Bank had two substandard loans totaling $24,000
and at December 31, 1998 had two substandard loans totaling $12,000.

     Allowance for Loan Losses.  The Bank has established a systematic
methodology for determining provisions for loan losses.  The methodology is
set forth in a formal policy and considers the need for an overall general
valuation allowance as well as specific allowances for individual loans.

     In originating loans, the Bank recognizes that losses will be experienced
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.  The Bank may increase its allowance for loan
losses by charging provisions for loan losses against the Bank's income.

                                       9
<PAGE>

     The general valuation allowance is maintained to cover losses inherent in
the portfolio of performing loans.  Management reviews the adequacy of the
allowance at least quarterly based on management's assessment of current
economic conditions, past loss and collection experience, and risk
characteristics of the loan portfolio.  The amount of the allowance is based
on management's evaluation of the collectibility of the loan portfolio, credit
concentrations, trends in historical loss experience, specific impaired loans,
peer group comparisons and economic conditions.  Allowances for impaired loans
are generally determined based on collateral values or the present value of
estimated cash flow.  Specific valuation allowances may be established to
absorb losses on loans for which full collectibility may not be reasonably
assured.  The amount of the allowance is based on the estimated value of the
collateral securing the loan and other analyses pertinent to each situation.

     At December 31, 1999, the Bank had an allowance for loan losses of
$226,000, which management believed to be adequate to absorb losses inherent
in the portfolio at that date.  Although management believes that it uses the
best information available to make such determinations in accordance with
generally accepted accounting principles, future adjustments to the allowance
for loan losses may be necessary and results of operations could be
significantly and adversely affected if circumstances differ substantially
from the assumptions used in making the determinations.  Furthermore, there
can be no assurance that regulators, in reviewing the Bank's loan portfolio,
will not request the Bank to increase significantly 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 will continue to be adequate or that
substantial 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 the Bank's financial
condition and results of operations.

     The following table sets forth an analysis of the Bank's allowance for
loan losses for the periods indicated.

                                            Year Ended December 31,
                                           -------------------------
                                            1999               1998
                                            ----               ----
                                                 (In Thousands)
  Total loans outstanding before net
   items . . . . . . . . . . . . . . .     $61,370           $50,233
                                           =======           =======
  Allowance balance at beginning
   of year............................     $   220           $   200
                                           -------           -------
  Provision...........................
    One-to-four family................          18                20
    Consumer..........................          --                --
                                           -------           -------
  Total...............................          18                20
                                           -------           -------
  Net charge-offs.....................
    Commercial........................           9                --
    One-to-four family................          --                --
    Consumer..........................           3                --
                                           -------           -------
  Total...............................          12                --
                                           -------           -------
  Allowance balance at end of year....     $   226           $   220
                                           =======           =======
  Allowance for loan losses as a percent
   of total loans outstanding.........        0.38%             0.44%
                                           =======           =======

                                       10
<PAGE>

     The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated.  The portion of the allowance
to each loan category does not necessarily represent the total available for
losses within that category since the total allowance applies to the entire
loan portfolio.  The allocation of the allowance to each category is not
necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any other category.

                                                 At December 31,
                                      --------------------------------------
                                             1999                1998
                                      ------------------  ------------------
                                                % of                % of
                                                Loans               Loans
                                                in Each             in Each
                                                Category            Category
                                                to Total            to Total
                                      Amount    Loans     Amount    Loans
                                      ------    -----     ------    -----
                                             (Dollars in Thousands)

  One- to four-family.............     $140     67.99%     $140     79.51%

  Commercial real estate..........       40     11.58        40      4.43
  Commercial......................       --      2.92        --        --
  Multi-family....................       25      8.65        25      9.42
  Construction....................        9      3.93        --        53
  Consumer and share..............       12      4.93        15      6.11
                                       ----    ------      ----    ------
    Total allowance...............     $226    100.00%     $220    100.00%
                                       ====    ======      ====    ======

Investment Activities

     The Bank is permitted under federal law to invest in various types of
liquid assets, including U.S. Treasury obligations, securities of various
federal agencies and of state and municipal governments, deposits at the
FHLB-Seattle, certificates of deposit of federally insured institutions,
certain bankers' acceptances and federal funds.  Subject to various
restrictions, the Bank may also invest a portion of its assets in commercial
paper and corporate debt securities.  The Bank is also required to maintain an
investment in FHLB stock as a condition of membership in the FHLB-Seattle.

     The Bank is required under federal regulations to maintain a minimum
amount of liquid assets.  At December 31, 1999, the Bank's regulatory
liquidity of 9.54% was significantly in excess of the 4% required by Office of
Thrift Supervision (the "OTS") regulations.  The securities in the Bank's
investment portfolio provide it with liquidity for funding loan originations
and enables the Bank to improve the match between the maturities and repricing
of its interest-rate sensitive assets and liabilities.  See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Liquidity and Capital Resources" contained in the Corporation's 1999 Annual
Report to Stockholders incorporated herein by reference.

     The President of the Bank determines appropriate investments in
accordance with the Board of Directors' approved investment policies and
procedures.  The Bank's policies generally limit investments to U.S.
Government and agency securities and mortgage-backed securities issued and
guaranteed by Federal Home Loan Mortgage Corporation ("FHLMC"), Federal
National Mortgage Association  ("FNMA"), and Government National Mortgage
Association ("GNMA").  The Bank's policies provide that investment purchases
be ratified at monthly Board of Directors meetings.  Investments are made
based on certain considerations, which include the interest rate, yield,
settlement date and maturity of the investment, the Bank's liquidity position,
and anticipated cash needs and sources (which in turn include outstanding
commitments, upcoming maturities, estimated deposits and anticipated loan
amortization and repayments).  The effect that the proposed investment would
have on the Bank's credit and interest rate risk, and risk-based capital is
also given consideration during the evaluation.

                                       11
<PAGE>

     At December 31, 1999, the Bank's investment and mortgage-backed
securities portfolio totaled $47.5 million and consisted principally of U.S.
Government and agency obligations and U.S. Government and agency mortgage-
backed securities.  At December 31, 1999, the Bank had investment securities
available-for-sale with an estimated market value of $5.1 million, which
includes stock in the FHLMC and two mutual funds, the assets of which
consisted of ARM loans and U.S. Government and agency securities.  The FHLMC
common stock at December 31, 1999 had an amortized cost of $55,000 and an
estimated market value of $2.3 million.  The market value of the FHLMC common
stock has increased significantly since its purchase in the mid-1980's.  From
time to time, investment levels may be increased or decreased depending upon
the yields on investment alternatives and upon management's judgment as to the
attractiveness of the yields then available in relation to other opportunities
and its expectation of the level of yield that will be available in the
future, as well as management's projections as to the short-term demand for
funds to be used in the Bank's loan origination and other activities.

     U.S. Government and Agency Obligations.  At December 31, 1999, the Bank's
portfolio of U.S. Government and agency obligations had a carrying value of
$2.5 million maturing in 2006. At December 31, 1999, the interest rates on
these obligations ranged from 6.88% to 7.52%.

     Mortgage-Backed Securities.  The Bank purchases mortgage-backed
securities in order to: (i) generate positive interest rate spreads on large
principal balances with minimal administrative expense; (ii) lower the credit
risk of the Bank as a result of the guarantees provided by FHLMC, FNMA, and
GNMA; (iii) enable the Bank to use mortgage-backed securities as collateral
for financing; and (iv) invest excess funds during periods of reduced loan
demand.  Included in the Bank's mortgage-backed securities portfolio are real
estate mortgage investment conduits ("REMICs"), which mature between 2008 and
2028 and have interest rates based primarily on the rate paid on U.S. Treasury
securities and the COFI.  At December 31, 1999, net mortgage-backed securities
totaled $42.4 million, or 37.04%, of total assets.  At December 31, 1999, $9.8
million of the mortgage-backed securities had adjustable rates of interest and
$32.6 million had fixed rates.  The mortgage-backed securities portfolio had
coupon rates ranging from 5.81% to 12.75% and had a weighted average yield of
6.51% during the year ended December 31, 1999.  At December 31, 1999, the
amortized cost of the Bank's mortgage-backed securities held to maturity was
$6.4 million.

     Mortgage-backed securities (which also are known as mortgage
participation certificates or pass-through certificates) typically represent a
participation interest in a pool of single-family or multi-family mortgages.
The principal and interest payments on these mortgages are passed from the
mortgage originators, through intermediaries (generally U.S. Government
agencies and government sponsored enterprises) that pool and resell the
participation interests in the form of securities, to investors such as the
Bank.  Such U.S. Government agencies and government sponsored enterprises,
which guarantee the payment of principal and interest to investors, primarily
include the FHLMC, FNMA and the GNMA.  Mortgage-backed securities typically
are issued with stated principal amounts, and the securities are backed by
pools of mortgages that have loans with interest rates that fall within a
specific range and have varying maturities.  Mortgage-backed securities
generally yield less than the loans that underlie such securities because of
the cost of payment guarantees and credit enhancements.  In addition,
mortgage-backed securities are usually more liquid than individual mortgage
loans and may be used to collateralize certain liabilities and obligations of
the Bank. These types of securities also permit the Bank to optimize its
regulatory capital because they have low risk weighting.

     REMICs are generally created by redirecting the cash flows from the pool
of mortgages or mortgage-backed securities underlying these securities to
create two or more classes (or tranches) with different maturity or risk
characteristics designed to meet a variety of investor needs and preferences.
Management believes these securities may represent attractive alternatives
relative to other investments due to the wide variety of maturity, repayment
and interest rate options available.  Investment practices of the Bank
prohibit the purchase of high risk REMICs.  The Bank held REMICs with a net
carrying value of $16.1 million at December 31, 1999. REMICs may be sponsored
by private issuers, such as mortgage bankers or money center banks, or by U.S.
Government agencies and government sponsored entities.  At December 31, 1999,
the Bank did not own any privately issued REMICs.

                                       12
<PAGE>

     Thrift Bulletin Number 52 ("TB-52"), the OTS Policy Statement on
securities portfolio policies and unsuitable investment practices, requires
that institutions classify mortgage derivative products acquired, including
REMICs and certain tranches of CMOs, as "high-risk mortgage securities" if
such products exhibit greater price volatility than a benchmark fixed-rate
30-year mortgage-backed pass-through security.  Institutions may only hold
high-risk mortgage securities to reduce interest-rate risk in accordance with
safe and sound practices and must also follow certain prudent safeguards in
the purchase and retention of such securities.  At December 31, 1999, the Bank
held $3.8 million securities that are identified under TB-52 as  "high-risk
mortgage securities."  The Bank also evaluates its mortgage-backed securities
portfolio annually for compliance with applicable regulatory requirements,
including testing for identification of high risk investments pursuant to
Federal Financial Institutions Examination Council standards.

     Derivatives also include "off balance sheet" financial products whose
value is derived from the value of an underlying financial asset, such as a
stock, bond, foreign currency, or a reference rate or index.  Such derivatives
include "forwards," "futures," "options" or "swaps."  The Bank's investment
policy does not permit investment in such "off balance sheet" derivative
instruments.

     Of the Bank's $42.4 million mortgage-backed securities portfolio at
December 31, 1999, $4.7 million had contractual maturities within six years
and $37.7 million had contractual maturities over six years.  The actual
maturity of a mortgage-backed security may be less than its stated maturity
due to prepayments of the underlying mortgages.  Prepayments that are faster
than anticipated may shorten the life of the security and may result in a loss
of any premiums paid and thereby reduce the net yield on such securities.
Although prepayments of underlying mortgages depend on many factors, including
the type of mortgages, the coupon rate, the age of mortgages, the geographical
location of the underlying real estate collateralizing the mortgages and
general levels of market interest rates, the difference between the interest
rates on the underlying mortgages and the prevailing mortgage interest rates
generally is the most significant determinant of the rate of prepayments.
During periods of declining mortgage interest rates, if the coupon rate of the
underlying mortgages exceeds the prevailing market interest rates offered for
mortgage loans, refinancing generally increases and accelerates the prepayment
of the underlying mortgages and the related security.  Under such
circumstances, the Bank may be subject to reinvestment risk because, to the
extent that the Bank's mortgage-backed securities amortize or prepay faster
than anticipated, the Bank may not be able to reinvest the proceeds of such
repayments and prepayments at a comparable rate.  In contrast to
mortgage-backed securities in which cash flow is received (and hence,
prepayment risk is shared) pro rata by all securities holders, the cash flow
from the mortgages or mortgage-backed securities underlying REMICs are
segmented and paid in accordance with a predetermined priority to investors
holding various tranches of such securities or obligations.  A particular
tranche of REMICs may therefore carry prepayment risk that differs from that
of both the underlying collateral and other tranches.

                                       13
<PAGE>

     The following table sets forth information regarding the Bank's mortgage-
backed securities (including REMICs) activity for the periods indicated.

                                                Year Ended December 31,
                                              ---------------------------
                                                1999               1998
                                                ----               ----
                                                     (In Thousands)

   Beginning balance......................     $45,369            $47,641
                                               -------            -------
   Mortgage-backed securities purchased...      15,601             21,835

   Amortization of premiums and discounts.         (70)               141

   Principal repayments and change in
    fair market value.....................     (18,473)           (24,248)
                                               -------            -------
         Ending balance...................     $42,427            $45,369
                                               =======            =======

     The following table sets forth the composition of the Bank's
mortgage-backed securities portfolio at the dates indicated.

                                                   At December 31,
                                      ---------------------------------------
                                             1999                 1998
                                      ------------------   ------------------
                                                Percent              Percent
                                       Amount   of Total    Amount   of Total
                                       ------   --------    ------   --------
                                            (Dollars in Thousands)

  Mortgage-backed securities:
   REMIC..........................    $16,062    37.86%     $14,549    32.07%
   GNMA...........................      5,635    13.28        6,862    15.13
   FNMA...........................     17,287    40.74       16,547    36.47
   FHLMC..........................      3,443     8.12        7,411    16.33
                                      -------   ------      -------   ------
     Total........................    $42,427   100.00%     $45,369   100.00%
                                      =======   ======      =======   ======

                                       14
<PAGE>

     The following table sets forth the contractual maturities of the Bank's
mortgage-backed securities portfolio as of December 31, 1999:

                     Contractual Maturities Due in Year(s) Ended December 31,
                     --------------------------------------------------------
                                            2003     2006    2016
                                             to       to     and
                      2000    2001   2002   2005     2015  Thereafter Total
                      ----    ----   ----   ----     ----  ---------- -----
                                       (In Thousands)

Mortgage-backed
 securities......... $1,382  $1,052  $ 26  $2,267  $10,229  $27,471  $42,427
                     ======  ======  ====  ======  =======  =======  =======

     The following table sets forth the carrying value of the Bank's
investment securities portfolio, short-term investments and FHLB stock at the
dates indicated.

                                                        At December 31,
                                                    ----------------------
                                                      1999          1998
                                                      ----          ----
                                                        (In Thousands)
  Investment securities held to maturity:
   U.S. Government securities.............          $   --         $   --
   U.S. agency securities.................              --             --
                                                    ------         ------
     Total held-to-maturity securities....              --             --
   Securities available-for-sale(1 and 2).           5,069          4,995
   Interest-bearing deposits..............             684          3,061
   FHLB stock.............................           1,464          1,361
                                                    ------         ------
     Total................................          $7,217         $9,417
                                                    ======         ======

  (1)  Includes FHLMC common stock and mutual funds.
  (2)  Excludes mortgaged-backed securities.

                                       15
<PAGE>

<TABLE>

     The following table sets forth certain information regarding the carrying values, weighted average
yields and maturities of the Bank's available-for-sale investment securities portfolios as of December 31,
1999.
                                                          More       More Than
                           One Year     More Than One   Than Five    Five to              Total
                           or Less      to Five Years  to Ten Years  Ten Years    Investment Securities
                        --------------- -------------- ------------- ------------ ----------------------
                         Carry-         Carry-         Carry-        Carry-       Carry-
                          ing    Average  ing  Average  ing   Average ing  Average ing  Average  Market
                         Value    Yield  Value  Yield  Value   Yield Value Yield  Value  Yield   Value
                         -----    -----  -----  -----  -----   ----- ----- -----  -----  -----   -----
                                               (Dollars in Thousands)

<S>                     <C>        <C>    <C>    <C>    <C>     <C>    <C>   <C>   <C>     <C>    <C>
Securities available-
 for-sale.............  $2,615(1)  $  --  $ 987  6.89%  $1,467  7.30%    --    --  $5,069  7.14%  $5,069
                        =========  =====  =====  ====   ======  ====   ====  ====  ======  ====   ======

(1) Consists of FHLMC common stock and mutual funds.

                                                        16
</TABLE>
<PAGE>

Deposit Activities and Other Sources of Funds

    General.  Deposits and loan repayments are the major sources of the Bank's
funds for lending and other investment purposes.  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.  Borrowings through the FHLB-Seattle may be used
to compensate for reductions in the availability of funds from other sources.
At December 31, 1999, the Bank had $8.8 million in borrowings from the FHLB.

     Deposit Accounts.  Substantially all of the Bank's depositors are
residents of south-central Montana.  Deposits are attracted from within the
Bank's market area through the offering of a broad selection of deposit
instruments, including Negotiable Order of Withdrawals ("NOW") accounts, money
market accounts, regular savings accounts, certificates of deposit and
retirement savings plans.  Deposit account terms vary, according to the
minimum balance required, the time periods the funds must remain on deposit
and the interest rate, among other factors.  In determining the terms of its
deposit accounts, the Bank considers current market interest rates,
profitability to the Bank, matching deposit and loan products and its customer
preferences and concerns.  The Bank reviews its deposit mix and pricing
weekly.

     The following table sets forth certain information concerning the Bank's
time deposits and other interest-bearing deposits at December 31, 1999.

Weighted                                                             Per-
Average                                                              centage
Interest   Original     Checking and Savings       Minimum           of Total
Rate        Term        Deposits                   Balance  Balance  Deposits
----        ----        --------------------       -------  -------  --------
                                                         (In Thousands)

2.18%    None           NOW accounts                 $200   $ 11,376   15.94%
3.00     None           Regular savings                 5     13,915   19.50
4.55     None           Money market accounts       1,000      6,826    9.57

                        Certificates of deposit:
                        -----------------------
4.70     1-3 months     Fixed term, fixed rate        500        731    1.03
4.86     4-6 months     Fixed term, fixed rate        500      5,843    8.19
4.86     7-12 months    Fixed term, fixed rate        500      9,686   13.58
5.31     13-24 months   Fixed term, fixed rate        500     11,274   15.80
5.60     25-36 months   Fixed term, fixed rate        500      5,682    7.96
5.66     37-48 months   Fixed term, fixed rate        500        859    1.20
6.28     49-120 months  Fixed term, fixed rate        500      3,421    4.79
5.51     Various        Jumbo certificates        100,000      1,740    2.44
                                                            --------  ------
                                                              71,353  100.00%
                                                                      ======
         Accrued interest on deposits                            103
                                                             -------
         Total                                               $71,456
                                                             =======
                                       17
<PAGE>

     The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of December
31, 1999.

        Maturity Period                    Amount
        ---------------                    ------
                                        (In Thousands)

  Three months or less..............       $  994
  Over three through six months.....          650
  Over six through 12 months........        2,516
  Over 12 months....................          877
                                           ------
       Total........................       $5,037
                                           ======

  Time Deposits by Rates

     The following table sets forth the time deposits in the Bank classified
by rates at December 31, 1999.

                                       Amount
                                       ------
                                   (In Thousands)

        3.00 - 5.00%..............    $ 19,062
        5.01 - 7.00%..............      19,329
      7.01 - 8.00%................         845
                                      --------
             Total................    $ 39,236
                                      ========

     The following table sets forth the amount and maturities of time deposits
at December 31, 1999.

                                                Amount Due
                           --------------------------------------------------
                                                           After
                            December  December  December  December
                              31,       31,        31,       31,
                             2000      2001       2002      2002      Total
                            --------  --------  --------  --------    -----
                                             (In Thousands)

  Time deposits..........   $27,861    $8,450    $1,425    $1,500    $39,236
Accrued interest on         =======    ======    ======    ======
 certificate accounts....                                                103
                                                                     -------
  Total..................                                            $39,339
                                                                     =======
Deposit Activities

    The following table sets forth the deposit activities of the Bank for the
periods indicated.

                                                 Year Ended December 31,
                                                 -----------------------
                                                   1999           1998
                                                   ----           ----
                                                      (In Thousands)
  Net increase (decrease) before interest
   credited...............................       $ 2,057        $(3,405)

  Interest credited.......................         2,884          2,959
                                                 -------        -------
  Net increase (decrease) in
   deposits...............................       $ 4,941        $  (446)
                                                 =======        =======

                                       18
<PAGE>

Borrowings

    While savings deposits are the primary source of funds for the Bank's
lending and investment activities and for its general business purposes, the
Bank also relies upon advances from the FHLB-Seattle to supplement its supply
of lendable funds, to meet deposit withdrawal requirements and to fund the
purchase of investment and mortgage-backed securities.  At December 31, 1999,
the Bank was eligible to borrow up to approximately $22.9 million, and had
borrowed $8.8 million.

     The FHLB-Seattle functions as a central reserve bank providing credit for
savings and loan associations and certain other member financial institutions.
As a member, the Bank is required to own capital stock in the FHLB-Seattle and
is authorized to apply for advances on the security of such stock and certain
of its mortgage loans and other assets (principally securities which are
obligations of, or guaranteed by, the U. S. Government) provided certain
creditworthiness standards have been met.  Advances are made pursuant to
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.

     The following table sets forth information concerning only short-term
borrowings (those maturing within one year or less) the Bank had during the
periods indicated.

                                               Year Ended December 31,
                                             ---------------------------
                                                 1999          1998
                                                 ----          ----
                                                (Dollars in Thousands)

  Short-term FHLB advances:
    Average balance outstanding.............    $2,726      $    333

    Maximum amount outstanding at any
      month-end during the period...........     4,800         2,000

    Weighted average interest rate
      during the period.....................      5.01%         4.72%

  Total short-term borrowings at
    end of period...........................     4,800          2,000


     For additional information on all borrowings of the Corporation see Notes
8 and 9 of the Notes to Consolidated Financial Statements in the Annual Report
incorporated herein by reference.

                                       19
<PAGE>

Subsidiary Activities

     Federal savings associations generally may invest up to 3% of their
assets in service corporations, provided that at least one-half of any amount
in excess of 1% is used primarily for community, inner-city and community
development projects.  The Bank's investment in its service corporation, Dime
Service Corporation, did not exceed these limits at December 31, 1999.

     Dime Service Corporation is a wholly owned subsidiary of the Bank.  It
was established in 1985 to purchase and operate an insurance agency business.
In 1992 and 1993, Dime Service Corporation purchased the insurance business of
two local insurance agencies.  Dime Service Corporation presently engages in
full service property and casualty insurance activities under the name "Dime
Insurance Agency."  At December 31, 1999, the Bank's investment in Dime
Service Corporation was $438,000.  Dime Service Corporation had total assets
of approximately $533,000 at December 31, 1999, and net income of
approximately $21,000 for the year ended December 31, 1999.  See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
contained in Corporation's Annual Report incorporated herein by reference.

                                 REGULATION

General

     The Bank is subject to extensive regulation, examination and supervision
by the OTS as its chartering agency, and the FDIC, as the insurer of its
deposits.  The activities of federal savings institutions are governed by the
Home Owners' Loan Act of 1933, as amended ("HOLA") and, in certain respects,
the Federal Deposit Insurance Act ("FDIA"), and the regulations issued by the
OTS and the FDIC to implement these statutes.  These laws and regulations
delineate the nature and extent of the activities in which federal savings
associations may engage.  Lending activities and other investments must comply
with various statutory and regulatory capital requirements.  In addition, the
Bank's relationship with its depositors and borrowers is also regulated to a
great extent, especially in such matters as the ownership of deposit accounts
and the form and content of the Bank's mortgage documents.  The Bank must file
reports with the OTS and the FDIC 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 financial
institutions.  There are periodic examinations by the OTS and the FDIC to
review the Bank's compliance with various regulatory requirements.  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 policies, whether by the OTS, the FDIC or
Congress, could have a material adverse impact on the Corporation, the Bank
and their operations.  The Corporation, as a savings and loan holding company,
is also required to file certain reports with, and otherwise comply with the
rules and regulations of the OTS.

Federal Regulation of Savings Associations

     Office of Thrift Supervision.  The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the
Treasury.  The OTS generally possesses the supervisory and regulatory duties
and responsibilities formerly vested in the Federal Home Loan Bank Board.
Among other functions, the OTS issues and enforces regulations affecting
federally insured savings associations and regularly examines these
institutions.

     All savings associations are required to pay assessments to the OTS to
fund the agency's operations.  The general assessments, paid on a semi-annual
basis, are determined based on the savings association's total assets,
including consolidated subsidiaries.  The Bank's OTS assessment for the fiscal
year ended December 31, 1999 was $32,000.

                                       20
<PAGE>

     Federal Home Loan Bank System.  The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB").  The
designated duties of the FHFB are to supervise the FHLBs, to ensure that the
FHLBs carry out their housing finance mission, to ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets, and to
ensure that the FHLBs operate in a safe and sound manner.

     The Bank, as a member of the FHLB-Seattle, is required to acquire and
hold shares of capital stock in the FHLB-Seattle in an amount equal to the
greater of (i) 1.0% of the aggregate outstanding principal amount of
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or (ii) 1/20 of its advances (i.e., borrowings)
from the FHLB-Seattle.  The Bank is in compliance with this requirement with
an investment in FHLB-Seattle stock of $1.5 million at December 31, 1999.

     Among other benefits, the FHLB provides a central credit facility
primarily for member institutions.  It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System.  It
makes advances to members in accordance with policies and procedures
established by the FHLB and the Board of Directors of the FHLB-Seattle.

     Federal Deposit Insurance Corporation.  The FDIC is an independent
federal agency that insures the deposits, up to prescribed statutory limits,
of depository institutions.  The FDIC maintains two separate insurance funds:
the Bank Insurance Fund ("BIF") and the SAIF.  As insurer of deposits, the
FDIC has examination, supervisory and enforcement authority over all savings
associations.  The Bank's accounts are insured by the SAIF up to the maximum
extent permitted by law.

     Under applicable regulations, the FDIC assigns an institution to one of
three capital categories based on the institution's financial information, as
of the reporting period ending seven months before the assessment period.  The
capital categories are:  (i) well-capitalized, (ii) adequately capitalized, or
(iii) undercapitalized.  An institution is also placed in one of three
supervisory subcategories within each capital group.  The supervisory subgroup
to which an institution is assigned is based on a supervisory evaluation
provided to the FDIC by the institution's primary federal regulator and
information that the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds.  An
institution's assessment rate depends on the capital category and supervisory
category to which it is assigned with the most well-capitalized, healthy
institutions receiving the lowest rates.

     Effective January 1, 1997, the premium schedule for BIF and SAIF insured
institutions ranged from 0 to 27 basis points.  However, SAIF insured
institutions and BIF insured institutions are required to pay a Financing
Corporation ("FICO") assessment in order to fund the interest on bonds issued
to resolve thrift failures in the 1980s.  This amount is currently equal to
approximately six basis points for each $100 in domestic deposits for SAIF
members, while BIF insured institutions pay an assessment equal to
approximately 1.50 basis points for each $100 in domestic deposits.  These
assessments, which may be revised based upon the level of BIF and SAIF
deposits, will continue until the bonds mature in the year 2015.

     The FDIC is authorized to raise the assessment rates in certain
circumstances.  The FDIC has exercised this authority several times in the
past and may raise insurance premiums in the future.  If such action is taken
by the FDIC, it could have an adverse effect on the earnings of the Bank.

     Under the Federal Deposit Insurance Act (FDIA"), insurance of deposits
may be terminated by the FDIC 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 FDIC or the OTS.  Management of the Bank
does not know of any  practice, condition or violation that might lead to
termination of deposit insurance.

                                       21
<PAGE>

     Liquidity Requirements.  Under OTS regulations, each savings institution
is required to maintain an average daily balance of  specified liquid assets
equal to a monthly average of not less than a specified percentage of its net
withdrawable deposit accounts plus short-term borrowings.  This liquidity
requirement is currently 4%, but may be changed from time to time by the OTS
to any amount within the range of 4% to 10%.  Monetary penalties may be
imposed for failure to meet liquidity requirements.   The Bank has never been
subject to monetary penalties for failure to meet its liquidity requirements.

     Prompt Corrective Action.  The OTS is required to take certain
supervisory actions against undercapitalized savings associations, the
severity of which depends upon the institution's degree of
undercapitalization.  Generally, an institution that has a ratio of total
capital to risk-weighted assets of less than 8%, a ratio of Tier 1 (core)
capital to total assets of less than 4%, or a ratio of core capital to total
assets of less than 4% (3% or less for institutions with the highest
examination rating) is considered to be "undercapitalized."  An institution
that has a total risk-based capital ratio less than 6%, a Tier I capital ratio
of less than 3% or a leverage ratio that is less than 3%  is considered to be
"significantly undercapitalized" and an 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 OTS is required to
appoint a receiver or conservator for a savings institution that is
"critically undercapitalized."  OTS regulations also require that a capital
restoration plan be filed with the OTS 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 an amount of up to the
lesser of 5% of the institution's assets or by the amount which would bring
the institution into compliance with all capital standards.  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 OTS also could 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.

     At December 31, 1999, the Bank was categorized as "well capitalized"
under the prompt corrective action regulations of the OTS.

     Standards for Safety and Soundness.  The federal banking regulatory
agencies have prescribed, by regulation, to establish standards for all
insured depository institutions relating to: (i) internal controls,
information systems and internal audit systems; (ii) loan documentation; (iii)
credit underwriting; (iv) interest rate risk exposure; (v) asset growth; (vi)
asset quality; (vii) earnings and (viii) compensation, fees and benefits
("Guidelines").   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 OTS
determines that the Bank fails to meet any standard prescribed by the
Guidelines, the agency may require the Bank to submit to the agency an
acceptable plan to achieve compliance with the standard.  Management is aware
of no conditions relating to these safety and soundness standards which would
require submission of a plan of compliance.

     Qualified Thrift Lender Test.  All savings associations, including Empire
Federal, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations.  This test requires a savings
association to have at least 65% of its portfolio assets (as defined by
regulation) in qualified thrift investments on a monthly average for nine out
of every 12 months on a rolling basis.  As an alternative, the savings
association may maintain 60% of its assets in those assets specified in
Section 7701(a)(19) of the Internal Revenue Code of 1986 as amended ("Code").
Under either test, such assets primarily consist of residential housing
related loans and investments.  At December 31, 1999, Empire Federal met the
test and its QTL percentage was 95.43%.

     Any savings association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL.  If an association does not requalify and coverts to a national bank
charter, it must remain SAIF-insured until the FDIC permits it to transfer to
the BIF.  If such an association has not yet requalified or converted to a
national bank, its new investments and activities are limited to those
permissible for both a savings association and a national bank, and it is
limited to national bank branching rights in its home state.  In addition,

                                       22
<PAGE>

the Bank is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends.  If such association
has not requalified or converted to a national bank within three years after
the failure, it must divest of all investments and cease all activities not
permissible for a national bank.  In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties.  If any
association that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies.  See "Savings and Loan Holding Company Regulations."

     Capital Requirements.  Federally insured savings associations, such as
the Bank, are required to maintain a minimum level of regulatory capital.  The
OTS has established capital standards, including a tangible capital
requirement, a leverage ratio (or core capital) requirement and a risk-based
capital requirement applicable to such savings association.

     The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation).  At December 31, 1999, the
Bank had tangible capital of $29.0 million, or 25.7% of adjusted total assets,
which is approximately $27.3 million above the minimum requirement of 1.5% of
adjusted total assets in effect on that date.  At December 31, 1999, the Bank
did not have any intangible assets.

     The capital standards also require core capital equal to at least 3% to
4% of adjusted total assets, depending on an institutions' supervisory rating.
Core capital generally consists of tangible capital.  At December 31, 1999,
the Bank had core capital equal to $29.0 million or 25.7% of adjusted total
assets, which is $25.6 million above the minimum leverage ratio requirement of
3% as in effect on that date.

     The OTS risk-based requirement requires savings associations to have
total capital of at least 8% or risk-weighted assets.  Total capital consists
of core capital, as defined above, and supplementary capital.  Supplementary
capital consists of certain permanent and maturing capital instruments that do
not qualify as core capital and general valuation loan and lease loss
allowances up to a maximum of 1.25% of risk-weighted assets.  Supplementary
capital may be used to satisfy the risk-based requirement only to the extent
of core capital.

     In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, are multiplied by a risk weight, ranging from
0% to 100%, based on the risk inherent in the type of assets.  For example,
the OTS has assigned a risk weight of 50% for prudently underwritten permanent
one-to-four family first lien mortgage loans not more than 90 days delinquent
and having a loan-to-value ratio of not more than 80% at origination unless
insured to such ratio by an insurer approved by FNMA or FHLMC.

     On December 31, 1999, the Bank had total risk-based capital of
approximately $30.2 million, including $29.0 million in core capital and $1.2
million in qualifying supplementary capital, and risk-weighted assets of $54
million, or total capital of 56.1% of risk-weighted assets.  This amount was
$25.9 million above the 8% requirement in effect on that date.

     The OTS is authorized to impose capital requirements in excess of these
standards on individual associations on a case-by-case basis.  The OTS and the
FDIC are authorized and, under certain circumstances required, to take certain
actions against savings associations that fail to meet their capital
requirements.  The OTS is generally required to take action to restrict the
activities of an "undercapitalized association" (generally defined to be one
with less than either a 4% core capital ratio, a 4% Tier 1 risked-based
capital ratio or an 8% risk-based capital ratio).  Any such association must
submit a capital restoration plan and until such plan is approved by the OTS
may not increase its assets, acquire another institution, establish a branch
or engage in any new activities, and generally may not make capital
distributions.  The OTS is authorized to impose the additional restrictions
that are applicable to significantly undercapitalized associations.

                                       23
<PAGE>

     The OTS is also generally authorized to reclassify an association into a
lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an
unsafe or unsound condition.

     The imposition by the OTS or the FDIC of any of these measures on the
Corporation or the Bank may have a substantial adverse effect on their
operations and profitability.

     Limitations on Capital Distributions.  The OTS imposes various
restrictions on savings associations with respect to their ability to make
distributions of capital, which include dividends, stock redemptions or
repurchases, cash-out mergers and other transactions charged to the capital
account.  The OTS also prohibits a savings association from declaring or
paying any dividends or from repurchasing any of its stock if, as a result of
such action, the regulatory capital of the association would be reduced below
the amount required to be maintained for the liquidation account established
in connection with the association's mutual to stock conversion.

     The Bank may make a capital distribution without OTS approval provided
that the Bank notify the OTS 30 days before it declares the capital
distribution and that the following requirements are met: (i) the Bank has a
regulatory rating in one of the two top examination categories, (ii) the Bank
is not of supervisory concern, and will remain adequately or well capitalized,
as defined in the OTS prompt corrective action regulations, following the
proposed distribution, and (iii) the distribution does not exceed the Bank's
net income for the calendar year-to-date plus retained net income for the
previous two calendar years (less any dividends previously paid).  If the Bank
does not meet these stated requirements, it must obtain the prior approval of
the OTS before declaring any proposed distributions.

     In the event the Bank's capital falls below its regulatory requirements
or the OTS notifies it that it is need of more than normal supervision, the
Bank's ability to make capital distributions will be restricted.  In addition,
no distribution will be made if the Bank is notified by the OTS that a
proposed capital distribution would constitute an unsafe and unsound practice,
which would otherwise be permitted by the regulation.

     Loans to One Borrower.  Federal law provides that savings institutions
are generally subject to the national bank limit on loans to one borrower.   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.   At
December 31, 1999, the Bank's limit on loans to one borrower was $3.3 million.
At December 31, 1999, the Bank's largest aggregate amount of loans to one
borrower was $1.6 million, all of which were performing according to their
original terms.

     Activities of Associations and Their Subsidiaries.  When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide
the information each agency may, by regulation, require.  Savings associations
also must conduct the activities of subsidiaries in accordance with existing
regulations and orders.

     The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary.  The
FDIC also may determine by regulation or order that any specific activity
poses a serious threat to the SAIF.  If so, it may require that no SAIF member
engage in that activity directly.

     Transactions with Affiliates.  Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act relative to transactions with
affiliates in the same manner and to the same extent as if the savings
association were a Federal Reserve member bank.  Generally, transactions
between a savings association or its subsidiaries and its affiliates are
required to be on terms as favorable to the association as transactions with
non-affiliates.  In addition, certain of these transactions, such as loans to
an affiliate, are restricted to a percentage of the

                                       24
<PAGE>

association's capital.  Affiliates of the Bank include the Corporation and any
company which is under common control with the Bank.  In addition, a savings
association may not lend to any affiliate engaged in activities not
permissible for a bank holding company or acquire the securities of most
affiliates.  The OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case by case basis.

     Certain transactions with directors, officers or controlling persons are
also subject to conflict of interest regulations enforced by the OTS.  These
conflict of interest regulations and other statutes also impose restrictions
on loans to such persons and their related interests.  Among other things,
such loans must be made on terms substantially the same as for loans to
unaffiliated individuals.

     Community Reinvestment Act.  Under the Community Reinvestment Act
("CRA"), a federal statute, all federally-insured financial institutions have
a continuing and affirmative obligation consistent with safe and sound
operations to help meet all the credit needs of its delineated community.  The
CRA does not establish specific lending requirements or programs nor does it
limit an institution's discretion to develop the types of products and
services that it believes are best suited to meet all the credit needs of its
delineated community.  The CRA requires the federal banking agencies, in
connection with regulatory examinations, to assess an institution's record of
meeting the credit needs of its delineated community and to take such record
into account in evaluating certain regulatory applications filed by an
institution.  The CRA requires public disclosure of an institution's CRA
rating.  The Bank received a "satisfactory" rating as a result of its latest
evaluation.

     Regulatory and Criminal Enforcement Provisions.  Under the FDIA, the OTS
as primary enforcement responsibility over savings institutions and has the
authority to bring action against 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 or directors, receivership, conservatorship or termination of
deposit insurance.  Civil penalties cover a wide range of violations and can
amount to $25,000 per day, or $1.0 million per day in especially egregious
cases.  Under the FDIA, the FDIC has the authority to recommend to the
Director of the OTS that enforcement action be taken with respect to a
particular savings institution.  If action is not taken by the Director, the
FDIC has authority to take such action under certain circumstances.  Federal
law also establishes criminal penalties for certain violations.

Savings and Loan Holding Company Regulations

     General.  The Corporation is a unitary savings and loan company subject
to regulatory oversight of the OTS.  Accordingly, the Corporation is required
to register and file reports with the OTS and is subject to regulation and
examination by the OTS.  In addition, the OTS has enforcement authority over
the Corporation and its non-savings association subsidiaries which also
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings association.

     Acquisitions.  Federal law and OTS regulations issued thereunder
generally prohibit a savings and loan holding company, without prior OTS
approval, from acquiring more than 5% of the voting stock of any other savings
association or savings and loan holding company or controlling the assets
thereof.  They also prohibit, among other things, any director or officer of a
savings and loan holding company, or any individual who owns or controls more
than 25% of the voting shares of such holding company, from acquiring control
of any savings association not a subsidiary of such savings and loan holding
company, unless the acquisition is approved by the OTS.

                                       25
<PAGE>

     Activities.   As a unitary savings and loan holding company, the
Corporation generally is not subject to activity restrictions.  If the
Corporation acquires control of another savings association as a separate
subsidiary, it would become a multiple savings and loan holding company and
the activities of the Bank and any other subsidiaries (other than the Bank or
any other SAIF insured savings association) would generally become subject to
additional restrictions.  There generally are more restrictions on the
activities of a multiple savings and loan holding company than a unitary
savings and loan holding company.  Federal law provides that, among other
things, no multiple savings and loan holding company or subsidiary thereof
which is not an insured association shall commence or continue for more than
two years after becoming a multiple savings and loan association holding
company or subsidiary thereof, any business activity other than:  (i)
furnishing or performing management services for a subsidiary insured
institution, (ii) conducting an insurance agency or escrow business, (iii)
holding, managing, or liquidating assets owned by or acquired from a
subsidiary insured institution, (iv) holding or managing properties used or
occupied by a subsidiary insured institution, (v) acting as trustee under
deeds of trust, (vi) those activities previously directly authorized by
regulation as of March 5, 1987 to be engaged in by multiple holding companies
or (vii) those activities authorized by the Federal Reserve Board as
permissible for bank holding companies, unless the OTS by regulation,
prohibits or limits such activities for savings and loan  holding companies.
Those activities described in (vii) above also must be approved by the OTS
prior to being engaged in by a multiple holding company.

     Qualified Thrift Lender Test.  If the Bank fails the qualified thrift
lender test, within one year the Corporation must register as, and will become
subject to, the significant activity restrictions applicable to bank holding
companies.  See "--Federal Regulation of Savings Associations--Qualified
Thrift Lender Test" for information regarding the Bank's qualified thrift
lender test.  The HOLA requires that any  savings and loan holding company
that controls a savings association that fails the qualified thrift lender
test, as explained under "-- Federal Regulation of Savings Association --
Qualified Thrift Lender Test," must, within one year after the date on which
the association ceases to be a qualified thrift lender, register as and be
deemed a bank holding company subject to all applicable laws and regulations.

     Financial Services Modernization Bill.  On November 12, 1999, President
Clinton signed into law the Gramm-Leach-Bliley Act (the "Act") which will,
effective March 11, 2000, permit qualifying bank holding companies to become
financial holding companies and thereby affiliate with securities firms and
insurance companies and engage in other activities that are financial in
nature.  The Act defines "financial in nature" to include securities
underwriting, dealing and market making; sponsoring mutual funds and
investment companies; insurance underwriting and agency; merchant banking
activities; and activities that the Board has determined to be closely related
to banking.  A qualifying national bank also may engage, subject to limitation
on investment, in activities that are financial in nature, other than
insurance underwriting, insurance company portfolio investment, real estate
development, and real estate investment, through a financial subsidiary of the
bank.

     The act also prohibits new unitary thrift holding companies from engaging
in nonfinancial activities or from affiliating with an nonfinancial entity.
As a grandfathered unitary thrift holding company, the Corporation will retain
its authority to engage in nonfinancial activities.

                                   TAXATION

Federal Taxation

     General.  The Corporation and the Bank report their income on a calendar
year basis using the accrual method of accounting and are subject to federal
income taxation in the same manner as other corporations with some exceptions,
including particularly the Bank'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 the
Bank or the Corporation.

     Tax Bad Debt Reserves.  For taxable years beginning prior to January 1,
1996, savings institutions such as the Bank which met certain definitional
tests primarily relating to their assets and the nature of their business

                                       26
<PAGE>

("qualifying thrifts") were permitted to establish a reserve for bad debts and
to make annual additions thereto, which additions may, within specified
formula limits, have been deducted in arriving at their taxable income.  The
Bank's deduction with respect to "qualifying loans," which are generally loans
secured by certain interests in real property, may have been computed using an
amount based on the Bank's actual loss experience, or a percentage equal to 8%
of the Bank's taxable income, computed with certain modifications and reduced
by the amount of any permitted additions to the nonqualifying reserve.  The
Bank's deduction with respect to nonqualifying loans was computed under the
experience method, which essentially allows a deduction based on the Bank's
actual loss experience over a period of several years.  Each year the Bank
selected the most favorable way to calculate the deduction attributable to an
addition to the tax bad debt reserve.

     Federal legislation repealed the reserve method of accounting for bad
debt reserves for tax years beginning after December 31, 1995.  As a result,
savings associations are no longer able to calculate their deduction for bad
debts using the percentage-of-taxable-income method.  Instead, savings
associations are required to compute their deduction based on specific
charge-offs during the taxable year or, if the savings association or its
controlled group had assets of less than $500 million, based on actual loss
experience over a period of years.  This legislation also requires savings
associations to recapture into income over a six-year period their post-1987
additions to their bad debt tax reserves, thereby generating additional tax
liability.  At December 31, 1999, the Bank's post-1987 reserves were
negligible. The recapture may be suspended for up to two years if, during
those years, the institution satisfies a residential loan requirement.  The
Bank met the residential loan requirement for the taxable year ending December
31, 1999.

     Under prior law, if the Bank failed to satisfy the qualifying thrift
definitional tests in any taxable year, it would be unable to make additions
to its bad debt reserve.  Instead, the Bank would be required to deduct bad
debts as they occur and would additionally be required to recapture its bad
debt reserve deductions ratably over a multi-year period.  At December 31,
1999, the Bank's total bad debt reserve for tax purposes was approximately
$3.3 million.  Among other things, the qualifying thrift definitional tests
required the Bank to hold at least 60% of its assets as "qualifying assets."
Qualifying assets generally include cash, obligations of the United States or
any agency or instrumentality thereof, certain obligations of a state or
political subdivision thereof, loans secured by interests in improved
residential real property or by savings accounts, student loans and property
used by the Bank in the conduct of its banking business.  Under current law, a
savings association will not be required to recapture its pre-1988 bad debt
reserves if it ceases to meet the qualifying thrift definitional tests.

     Distributions.  To the extent that the Bank makes "nondividend
distributions" to the Corporation that are considered as made: (i) from the
reserve for losses on qualifying real property loans, to the extent the
reserve for such losses exceeds the amount that would have been allowed under
the experience method; or (ii) from the supplemental reserve for losses on
loans ("Excess Distributions"), then an amount based on the amount distributed
will be included in the Bank's taxable income.  Nondividend distributions
include distributions in excess of the Bank's current and accumulated earnings
and profits, distributions in redemption of stock, and distributions in
partial or complete liquidation.  However, dividends paid out of the Bank's
current or accumulated earnings and profits, as calculated for federal income
tax purposes, will not be considered to result in a distribution from the
Bank's bad debt reserve.  Thus, any dividends to the Corporation that would
reduce amounts appropriated to the Bank's bad debt reserve and deducted for
federal income tax purposes would create a tax liability for the Bank.  The
amount of additional taxable income attributable to an Excess Distribution is
an amount that, when reduced by the tax attributable to the income, is equal
to the amount of the distribution.  Thus, if, the Bank makes a "nondividend
distribution," then approximately one and one-half times the amount so used
would be includable in gross income for federal income tax purposes, assuming
a 35% corporate income tax rate (exclusive of state and local taxes).  See
"REGULATION -- Federal Regulation of Savings Associations -- Limitations on
Capital Distributions" for limits on the payment of dividends by the Bank.
The Bank does not intend to pay dividends that would result in a recapture of
any portion of its tax bad debt reserve.

     Corporate Alternative Minimum Tax.  The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%.  The excess of the tax bad
debt reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI.  In addition,
only 90% of AMTI can be offset by net operating loss carryovers.

                                       27
<PAGE>

AMTI is increased by an amount equal to 75% of the amount by which the Bank's
adjusted current earnings exceeds its AMTI (determined without regard to this
preference and prior to reduction for net operating losses).  For taxable
years beginning after December 31, 1986, and before January 1, 1997, an
environmental tax of .12% of the excess of AMTI (with certain modification)
over $2.0 million is imposed on corporations, including the Bank, whether or
not an Alternative Minimum Tax ("AMT") is paid.

     Dividends-Received Deduction and Other Matters.  The Corporation may
exclude from its income 100% of dividends received from the Bank as a member
of the same affiliated group of corporations.  The corporate dividends-
received deduction is generally 70% in the case of dividends received from
unaffiliated corporations with which the Corporation and the Bank will not
file a consolidated tax return, except that if the Corporation or the Bank
owns more than 20% of the stock of a corporation distributing a dividend, then
80% of any dividends received may be deducted.

     Audits.  There have not been any Internal Revenue Service audits of the
Bank's federal income tax returns during the past five years.

State Taxation

     The Corporation is subject to the Montana Corporation License Tax, which
is imposed at the rate of 6.75% of Montana taxable income.  There have not
been any audits of the Corporation's state tax returns during the past five
years.

Competition

    The Bank operates in an extremely competitive market for the attraction of
savings deposits (its primary source of lendable funds) and in the origination
of loans.  Historically, its most direct competition for savings deposits has
come from commercial banks, thrift institutions and credit unions operating in
its market area.  Some of these commercial banks are subsidiaries of large
regional holding companies having vastly greater resources than the Bank at
their disposal.  At December 31, 1999, there were 25 commercial banks
(including branch offices), two thrift institutions (in addition to the Bank)
and two credit unions in Park, Gallatin and Sweet Grass Counties.
Particularly in times of high market interest rates, the Bank has faced
competition for investors' funds from short-term money market securities and
corporate and U.S. Government securities.  The Bank competes for loan
originations with mortgage bankers, thrift institutions, credit unions and
commercial banks.  Such competition for deposits and loans may limit the
Bank's future growth and earnings prospects.

Personnel

     As of December 31, 1999, the Bank had 42 full-time employees, 13 of which
are employed by Dime Service Corporation and five part-time employees, none of
whom were represented by a collective bargaining unit.  The Bank believes its
relationship with its employees is good.

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

     The Bank has three offices.   The main office is located at 123 South
Main Street, Livingston, Montana 59047.  The main office was opened in 1923
and the present square footage is approximately 15,000 feet.   The Bank
purchased the building effective July 1, 1998, which was approved by the OTS,
for $750,000.  The sellers accepted a 10-year 9% note as payment.  The net
book value of the property and equipment, including land previously owned, is
$1.1 million.

     The Bank has branch offices located at 101 McLeod Street, Big Timber,
Montana 59011 and at 5 West Mendenhall Street, Bozeman, Montana 59715.  The
Big Timber branch office consists of approximately 2,000 square feet, was
opened in 1980 in connection with the merger of the Big Timber Building and
Loan Association, and relocated to its current facility in 1984.  At December
31, 1999, the net book value of the property and equipment was

                                       28
<PAGE>

 $218,000.  The Bozeman branch office consists of approximately 7,000 square
feet, was opened in 1958 in connection with the merger with Pioneer Building
and Loan Association and relocated to its current facility in 1971.  At
December 31, 1999, the net book value of the property and equipment was
$752,000.  During the third quarter of 1999, the Bank acquired property in
Billings, Montana for a de novo branch facility.  At December 31, 1999 the
Bank has recorded $726,000 related to this property, and management estimates
that an additional $850,000 will be spent remodeling the facility in the first
quarter of 2000.  The net book value of the Bank's premises and equipment at
December 31, 1999 was $2.8 million.

     The Bank's subsidiary, Dime Service Corporation, leases offices in
Livingston, Big Timber and Bozeman, Montana.  The Livingston office is 2,500
square feet, the Big Timber office is 365 square feet and the Bozeman office
is 650 square feet.  There are no written lease agreements for the Livingston
and Big Timber offices.

                                       29
<PAGE>

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

     From time to time, the Bank is involved in routine legal proceedings
occurring in the ordinary course of business.  At December 31, 1999, the Bank
was not a party to any legal proceedings that management of the Bank believed
would be materially adverse to the financial condition, results of operations,
cash flows or capital ratios of the Bank.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1999.

Item 5.  Market for the Registrant's Common Equity and Related Stockholder
--------------------------------------------------------------------------
         Matters
         -------

     The information contained under the section captioned "Stock Market
Information" in the Company's Annual Report is incorporated herein by
reference.

Item 6.  Management's Discussion and Analysis of Plan of Operation
------------------------------------------------------------------

     The required information is contained in section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Annual Report and is incorporated herein by reference.

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

     The Corporation's consolidated financial statements required herein are
contained in the Annual Report and are incorporated herein by reference.


Item 8.  Changes in and Disagreements With Accountants on Accounting and
------------------------------------------------------------------------
         Financial Disclosure
         --------------------

     No changes in or disagreements with the Corporation's independent
accountants on accounting and financial disclosure has occurred during the
past 24 months.

                                       30
<PAGE>

                               PART III

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

     The information contained under the sections captioned "Voting Securities
and Security Ownership of Certain Beneficial Owners and Management," "Proposal
I   Electing Directors" and "Compliance with Section 16(a) of the Exchange
Act" in the Corporation's definitive proxy statement for the Corporation's
Annual Meeting of Stockholders (the "Proxy Statement") is incorporated herein
by reference.

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

     The information contained under the section captioned "Director and
Executive Officer Compensation" in the Proxy Statement is incorporated herein
by reference.

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

         (a)  Security Ownership of Certain Beneficial Owners

              Information required by this item is incorporated herein by
              reference to the section captioned "Voting Securities and
              Security Ownership of Certain Beneficial Owners and Management"
              in the Proxy Statement.

         (b)  Security Ownership of Management

              Information required by this item is incorporated herein by
              reference to the section captioned "Proposal I   Electing
              Directors" in the Proxy Statement.

         (c)  Management of the Corporation knows of no arrangements,
              including any pledge by any person of securities of the
              Corporation, the operation of which may at a subsequent date
              result in a change in control of the Registrant.

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

     The information required by this item is incorporated herein by reference
to the section captioned "Certain Relationships and Related Transactions" and
"Voting Securities and Principal Holders Thereof" in the Proxy Statement.

                                       31
<PAGE>

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

          (a)  Exhibits

          3.1   Certificate of Incorporation of Empire Federal Bancorp, Inc.
                (1)
          3.2   Bylaws of Empire Federal Bancorp, Inc. (1)
          10.1  Employment Agreement with Beverly D. Harris (3)
          10.2  Employment Agreement with William H. Ruegamer
          10.3  Employee Stock Ownership Plan (1)
          10.4  Management Recognition and Development Plan (2)
          10.5  Stock Option Plan (2)
          10.6  Financial Institution's Thrift Plan (401(k))
          11    Statement regarding computation of earnings per share (see
                Notes 1 and 12 to the Notes to Consolidated Financial
                Statements in the Corporation's Annual Report)
          13    Annual Report to Stockholders for the year ended December 31,
                1999
          21    Subsidiaries of the Registrant
          23    Consent of Independent Auditors
          27    Financial Data Schedule

--------------------
(1)  Incorporated by reference to the Corporation's Registration Statement on
     Form SB-1, File No. 333-12653.
(2)  Incorporated by reference to the Registrant's Annual Meeting Proxy
     Statement dated April 25, 1999.
(3)  Incorporated by reference to the Registrant's Annual Report on Form
     10-KSB for the fiscal year ended December 31, 1999.

     (b)  Report on Form 8-K

          No Forms 8-K were filed during the quarter ended December 31, 1999.

                                       32
<PAGE>

                                 SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                      EMPIRE FEDERAL BANCORP, INC.

Date:  March 27, 2000                 By: s/s William H. Ruegamer
                                          -----------------------------------
                                          William H. Ruegamer
                                          President and Chief
                                          Executive Officer
                                         (Duly Authorized Representative)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By: s/s William H. Ruegamer                         March 27, 2000
    --------------------------------------     -------------------
    William H. Ruegamer
    President and Chief Executive Officer
    (Principal Executive Officer)

By: s/s Beverly D. Harris                           March 27, 2000
    --------------------------------------     -------------------
    Beverly D. Harris
    Vice Chairman and Director

By: s/s Walter J. Peterson Jr.                      March 27, 2000
    --------------------------------------     -------------------
    Walter J. Peterson Jr.
    Chairman of the Board

By: s/s John R. Boe                                 March 27, 2000
    --------------------------------------     -------------------
    John R. Boe
    Director

By: s/s Edwin H. Doig                               March 27, 2000
    --------------------------------------     -------------------
    Edwin H. Doig
    Director

By: s/s Sanroe J. Kaisler Jr.                       March 27, 2000
    --------------------------------------     -------------------
    Sanroe J. Kaisler Jr.
    Director

By: s/s Walter R. Sales                             March 27, 2000
    --------------------------------------     -------------------
    Walter R. Sales
    Director

By: s/s Burton Wastcoat                             March 27, 2000
    --------------------------------------     -------------------
    Burton Wastcoat
    Director
                                       33
<PAGE>



                                  Exhibit 10.6

                   Financial Institution's Thrift Plan (401(k))

<PAGE>

EMPLOYER'S RESOLUTION AND APPLICATION TO PARTICIPATE IN
THE FINANCIAL INSTITUTIONS THRIFT PLAN


Resolution #  1695
                                                             Pentegra
                                                    Retirement Plan Solutions


    WHEREAS, the Financial Institutions Thrift Plan (the "Thrift Plan") has
been established to provide a convenient way for employees of eligible
organizations to save on a regular and long-term basis through contributions
to, and the investment of such contributions under the Thrift Plan; and

    WHEREAS, Empire Federal Savings Bank (the "Employer") desires to
participate in the Thrift Plan in order to further the best interests of its
employees:

    NOW, THEREFORE, IT IS RESOLVED, that the Employer:

    1.  Adopts and agrees to comply with and be bound by the Thrift Plan, of
        which all Articles hereinafter cited are a part, and the Declaration
        of Trust relating thereto as both such documents now exist and may be
        hereafter amended.

    2.  Requests that its commencement date be set as January 1, 1999.

    3.  Establishes that each employee is eligible for membership in the
        Thrift Plan upon the later of the first day of the month coincident
        with or next following (I) the Employer's commencement date, or (ii)
        (check a,b,c and/or d):

        a) [ ]  the employee's date of employment, or

        b) [ ]  the completion of               (1,2,3...11) consecutive-month
                                  --------------
                periods (measured from the first day of employment and each
                successive period thereafter) during each of which       hours
                                                                   -----
                of service (83 1/3 times number of months elected) are
                completed, or

        c) [x]  the completion of [x] 12 or [ ] 24 consecutive-month periods
                (measured from the first day of employment and then from each
                January 1st thereafter) during each of which 1,000 hours of
                service are completed (24 month eligibility requirement not
                available unless 100% immediate vesting is elected for all
                employer contributions) and/or

        d) [ ]  attainment of age 21.

    4.  Makes such eligibility requirement(s) established under Item 3
        effective              1, 19     (may be waived for up to 12 months
                  ------------      ----
        from commencement date) and applicable to:

        a) [ ]  both present and future employees, or

        b) [ ]  future employees only.

NOTE:  Such eligibility requirements shall not apply to an employee who was
previously a member of the Thrift Plan with this or any other participating
employer.

    5.  Establishes by checking this box [ ] that the employees who are or
        become compensated on an hourly basis (hourly rate X actual hours of
        service) will be ineligible for membership in the Thrift Plan
        (regardless of the number of hours actually worked in any Plan Year).

    6.  Agrees to enroll each employee when eligible whether or not he/she
        elects to contribute to the Plan.

                    Thrift Form 100.15(96) Page 1 of 6

<PAGE>

Features
--------

    7.  Employee Contributions
        Authorizes each eligible member to contribute an amount equal to 1%*,
        2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10%, 11%, 12%, 13%, 14% or 15% of
        monthly Plan Salary to the Plan on a payroll deduction basis and
        agrees to remit such amounts to the Plan on a monthly basis for credit
        to the account of such member.

    8.  Employer Matching Contributions
        Establishes the following formula as the basis upon which its monthly
        Employer matching contributions, if any, will be made:

        a)  Matching Formula (check one box):
            ----------------

    [ ]  Formula 0*       -     0% (no Employer matching contributions)
         ---------
    [ ]  Formula 25*      -     25% of the member's contributions
         ----------
    [X]  Formula 50**     -     50% of the member's contributions
         ----------
    [ ]  Formula 75       -     75% of the member's contributions
         ----------
    [ ]  Formula 100      -     100% of the member's contributions
         -----------
    [ ]  Formula Step 1** (i)   50% of the member's contributions, through the
         --------------         third year of employment,
                          (ii)  75% of the member's contributions, through the
                                fifth year of employment,
                          (iii) 100% of the member's contributions, upon the
                                completion of 5 or more years of employment.
    [ ]  Formula Step 2***(i)   100% of the member's contributions, through
         --------------         the third year of employment,
                          (ii)  150% of the member's contributions, through
                                the fifth year of employment,
                          (iii) 200% of the member's contributions, upon the
                                completion of 5 or more years of employment.
    [ ]  Formula 150****  -     150% of the member's contributions
         -----------
    [ ]  Formula 200***   -     200% of the member's contributions
         -----------

         b)  Matching Limit (fill in an amount below):
             --------------
             Such employer matching contributions shall be applied only to a
             member's contributions that do not exceed 6% of monthly Plan
             Salary (1%,2%,...15%) (except as restricted below).

           *  Not available to an Employer that adopts the Option 1 401(k)
              feature.

          **  Not available to an Employer that adopts the Option 1 401(k)
              feature and contributes monthly on behalf of each of its members
              an amount equal to a percentage of the member's contributions
              not in excess of 3% of Plan salary for such month.

         ***  Not available to an Employer that contributes monthly on behalf
              of each of its members an amount equal to a percentage of the
              member's contributions in excess of 6% of Plan salary for such
              month.

        ****  Not available to an Employer that contributes monthly on behalf
              of each of its members an amount equal to a percentage of the
              member's contributions in excess of 8% of Plan salary for such
              month.

                    Thrift Form 100.15(96) Page 2 of 6

<PAGE>

    9.  Provides that the definition of Salary for Plan purposes will be
        (check (a) or (b) or (c) below):

        a) [X]  Basic Salary rate, based on either:

                  (1)      the salary rate in effect on January 1 of each year

                  (2) [X]  the salary rate reflecting changes occurring during
                           the year

        b) [ ]  Basic Salary rate reflecting changes occurring during the
                year, plus (check all that apply):

                  (1) [ ]  commissions not in excess of $
                                                         ---------------
                  (2) [ ]  overtime

                  (3) [ ]  overtime and bonuses

        c) [ ]  Total taxable salary as reported on the member's Internal
                Revenue Service Form W-2 (exclusive of any salary deferred
                from a prior year), reflecting salary changes occurring during
                the year.

        Member pre-tax contributions to a Section 401(k) plan are included in
        Plan salary.  Member pre-tax  contributions to a Section 125 cafeteria
        plan are also to be included in Plan salary, unless the Employer
        elects exclude such amounts by checking this box [ ].

   10.  401(k) Features
        Adopts a 401(k) Feature indicated below.  A 401(k) account will be
established for each eligible employee and contributions will be allocated
accordingly.  No member may contribute more than $10,000 (plus permissible
cost of living adjustments) per year to a 401(k) account.

        [ ]  Option 1 -
             --------
             Requiring the employer to contribute on a monthly basis an
             amount equal to at least 2% of the first $3,750 of every
             member's monthly Plan salary.

        [ ]  Option 2 -
              --------
             A member's contributions may be allocated to either the member's
             401(k) account and/or his/her Regular account in increments of
             1% of salary.  The employer's contributions shall first be
             allocated to the member's 401(k) account until the total of the
             member's and the employer's contributions allocated to the
             401(k) account equals   % (0,1,2,3......15) of the member's Plan
                                   --
             salary.  The employer's contributions in excess of this amount
             shall be allocated to the member's Regular account.

        [X]  Option 3 -
             --------
             A member's contributions shall be allocated to the member's
             401(k) account.  The employer's contributions shall be allocated
             to the member's Regular account.

   11.  Signifies its election (by checking this box [X]) to make available to
        its members the Loan Program applicable to Regular, 401(k) and
        Rollover accounts, if any, and agrees to withhold and remit their
        monthly repayments while employed.

   12.  Signifies its election (by checking this box [ ]) to impose withdrawal
        suspension periods in the event of certain in-service withdrawals from
        members' Regular accounts.

   13.  Basic Contribution Feature
        Agrees to remit to the Plan a basic monthly contribution equal to   %
                                                                          --
        (0,1,2,3....15) of each of its member's monthly Plan salary, subject
        to IRS limitations.

        Signifies its election (by checking this box [X]) to restrict the
        allocation of the basic monthly contributions to only those members
        who were employed by the employer on the last working day of the month
        for which the basic contribution is made.

        Agrees that the basic monthly contribution shall be credited to the
        member's (check (a) or (b) below):

        a) [ ]  401(k) account, or

        b) [ ]  Regular account

                    Thrift Form 100.15(96) Page 3 of 6

<PAGE>

   14.  Profit Sharing Feature (items 14 through 20)

        Signifies its adoption (by checking this box [ ]) of the Profit
        Sharing Feature of the Thrift Plan and establishes as its Contribution
        Determination Period (check one box):

        a) [ ]  the Calendar Year (Plan Year) meaning January 1 through and
                including December 31, or

        b) [ ]  the Employer's Fiscal Year (defined Plan's "limitation year")
                meaning the 12 consecutive month period commencing
                                                                   ---------
                                                                 (Month)(Day)
                ending on                 , or
                          ----------------
                           (Month)  (Day)

        c) [ ]  the three consecutive monthly periods that comprise each of
                the Calendar Year quarters, or

        d) [ ]  the three consecutive monthly periods that comprise each of
                the Employer's Fiscal Year quarters.

   15.  Understands that the Employer may contribute for any Contribution
        Determination Period a discretionary amount not to exceed the maximum
        amount deductible for Federal income tax purposes for such Period on
        account of such contributions (presently 15% of Plan Compensation per
        year), and any such contribution may not be made prior to the last
        business day of such  Period, but must be made no later than the last
        business day of the second month following such Period.

        Agrees that the contribution for any Contribution Determination Period
        shall be allocated to each member who is employed by the Employer as
        of the last day of such Periods as follows:

        a) [ ]  In the same ratio as each member's Plan Compensation for the
                Contribution Determination Period bears to the total of such
                Plan Compensation of all members, or

        b) [ ]  In the same ratio as each member's Plan Compensation for the
                portion of the Contribution Determination Period during which
                the member satisfied the eligibility requirement(s) to the
                total of such Plan Compensation of all members.

   16.  Understands that a member shall become 100% vested upon death,
        approved disability, or attainment of normal retirement age (age 65).

   17.  Agrees that a member may not make withdrawals from the Profit Sharing
        Account prior to termination of employment.  Loans are not permitted
        from the Profit Sharing Feature.

   18.  Agrees that all contributions on behalf of each member shall be
        invested in:

        a) [ ]  Stable Value Fund only; or

        b) [ ]  Money Market Fund  only; or

        c) [ ]  S&P 500 Stock Fund and/or Stable Value Fund and/or S&P MidCap
                Stock Fund and/or Money Market Fund and/or Government Bond
                Fund and/or International Stock Fund and/or Asset Allocation
                Funds at the direction of each member.

   19.  Understands that the adoption of the Profit Sharing Feature is (check
        only if applicable):

        a) [ ]  an addition to the Employer's current participation in the
                Thrift Plan.

        b) [ ]  a substitution by the Employer for all employee and employer
                contributions to the Incentive Savings/401(k) Features.

   20.    Understands that commencing and continuing participation in the
Profit Sharing Feature of the Thrift Plan are conditioned on the approval of
the Profit Sharing Feature of the Thrift Plan by the Internal Revenue Service
and the satisfaction of certain government requirements such as the minimum
coverage requirements.

                    Thrift Form 100.15(96) Page 4 of 6

<PAGE>

   21.  Vesting   Adopts the following vesting schedule(s) with respect to
                  each type of employer contributions:

                                      Completed Years         Vested
                     Schedule            of Service         Percentage
             -------------------------------------------------------------

             A.  Immediate Vesting     Upon Enrollment         100%
             -------------------------------------------------------------
             B.  3-Year Cliff Vesting      0-2                   0%
                                            3                  100%
             -------------------------------------------------------------
             C.  5-Year Cliff Vesting      0-4                   0%
                                            5                  100%
             -------------------------------------------------------------
             D.  4-Year Graded Vesting  Less than 1              0%
                                            1                   25%
                                            2                   50%
                                            3                   75%
                                            4                  100%
             -------------------------------------------------------------
             E.  2-6 Year Graded        Less than 2              0%
                  Vesting                   2                   20%
                                            3                   40%
                                            4                   60%
                                            5                   80%
                                            6                  100%
             -------------------------------------------------------------

                  A member who (I) dies while in active service, (ii) has been
                  approved for disability or (iii) reaches age 65 is 100%
                  vested regardless of the number of completed years of
                  service.

                 (Fill in the blank with the chosen vesting schedule)

        a) Vesting Schedule       C        solely with respect to employer
                             -----------   monthly matching contributions.
                                           ------------------------------

        b) Vesting Schedule                solely with respect to employer
                             -----------   basic monthly contributions and any
                                           ---------------------------
                                           supplemental year-end
                                           ---------------------
                                           contributions.
                                           -------------

        c) Vesting Schedule                solely with respect to profit
                             -----------                          ------
                                           sharing accounts in case of the
                                           ----------------
                                           profit sharing feature.

   22.  Signifies its election (by checking this box [ ]) to make available to
        its employees, who have not satisfied the eligibility requirements in
        3. above, the Rollover provision permitting rollovers from other IRS
        qualified plans or rollover IRAs to a separate account under the Plan.

   23.  [ ] Adopts other provisions pursuant to the attached rider(s).

   24.  Authorizes and directs its officers, or any of them, to execute the
        Employer's Application below and take such other actions as may be
        necessary to make effective and to continue the participation of the
        Employer in the Financial Institutions Thrift Plan.

                    Thrift Form 100.15(96) Page 5 of 6

<PAGE>

       I, the undersigned, being duly elected and acting Secretary of Empire
Federal Savings Bank hereby certify that the above Resolution and execution of
the below Application has been duly authorized by the Board of Directors of
said Employer and that said authorization continues in effect as of the date
hereof.  I further certify that the Employer has the lawful power to adopt the
Plan and Trust for its employees, and the adoption of such Plan and Trust has
been duly authorized, and all necessary approvals of such adoption have been
obtained.


    Dec. 30, 1998                         /s/ Ann Worthington
----------------------------------        -----------------------------------
             Date                               Signature of Secretary




                               APPLICATION
                               -----------

                                               81-0132080
                                        -------------------------
                                        Federal Identification No.


The  Empire Federal Savings and Loan Association
     -------------------------------------------------------------------------
Address  123 South Main Street, Livingston, MT 59047
         ---------------------------------------------------------------------
(the Employer) hereby applies for participation in the Financial Institutions
Thrift Plan under the conditions stated in the foregoing Resolution.


    Dec. 30, 1998                         /s/ Beverly D. Harris
----------------------------------        -----------------------------------
             Date                           Signature of Authorized Officer

                                          President
                                          -----------------------------------
                                                        Title



                                                            Pentegra Group
                                                  108 Corporate Park Drive
                                               White Plains, NY 10604-3805
                                                         Tel: 800-872-3473
                                                         Fax: 914-694-9384

                    Thrift Form 100.15(96) Page 6 of 6

<PAGE>











                           FINANCIAL INSTITUTIONS

                                THRIFT PLAN




                     14th Revision, Effective July 1, 1993






            108 Corporate Park Drive  White Plains, N.Y. 10604

<PAGE>


                    A tax-exempt, trusteed savings plan
                          established July 1, 1970
                      in order that eligible employees
       of financial institutions and other organizations serving them
             may save and invest on a regular, long term basis.

<PAGE>

                             TABLE OF CONTENTS


 PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i

 ARTICLE I     DEFINITIONS  . . . . . . . . . . . . . . . . . . . . .1

 ARTICLE II    PARTICIPATION AND MEMBERSHIP  . . . . . . . . . . . . 9
   Section 1   Employer Participation . . . . . . . . . . . . . . .  9
   Section 2   Employee Membership  . . . . . . . . . . . . . . . .  9

 ARTICLE III   CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 13
   Section 1   Contributions by Members . . . . . . . . . . . . . . 13
   Section 2   Regular Contributions by Employer  . . . . . . . . . 13
   Section 3   Supplemental Contributions by Employer. .. . . . . . 15
   Section 4   401(k) Features  . . . . . . . . . . . . . . . . . . 16
   Section 5   Remittance of Contributions  . . . . . . . . . . . . 23
   Section 6   Transfer of Funds and Rollover
                  Contributions . . . . . . . . . . . . . . . . . . 23
   Section 7   Limitations on Member Contributions
                 and Matching Employer Contributions  . . . . . . . 27
   Section 8   Profit Sharing Feature . . . . . . . . . . . . . . . 29

 ARTICLE IV    INVESTMENT OF CONTRIBUTIONS  . . . . . . . . . . . . 35

 ARTICLE V     MEMBERS' ACCOUNTS, UNITS AND VALUATION . . . . . . . 38

 ARTICLE VI    VESTING OF UNITS . . . . . . . . . . . . . . . . . . 39
   Section 1   Vesting  . . . . . . . . . . . . . . . . . . . . . . 39
   Section 2   Forfeitures  . . . . . . . . . . . . . . . . . . . . 41

 ARTICLE VII   WITHDRAWAL PAYMENTS. . . . . . . . . . . . . . . . . 43
   Section 1   General  . . . . . . . . . . . . . . . . . . . . . . 43
   Section 2   Account Withdrawal While Employed  . . . . . . . . . 44
   Section 3   Account Withdrawal Upon Termination of
                 Employment or Employer Participation . . . . . . . 44
   Section 4   Account Withdrawal Upon Member's
                 Disability . . . . . . . . . . . . . . . . . . . . 48
   Section 5   Member's Death . . . . . . . . . . . . . . . . . . . 49

 ARTICLE VIII  LOAN PROGRAM . . . . . . . . . . . . . . . . . . . . 51
   Section 1   General  . . . . . . . . . . . . . . . . . . . . . . 51
   Section 2   Loan Application . . . . . . . . . . . . . . . . . . 51
   Section 3   Permitted Loan Amount  . . . . . . . . . . . . . . . 52
   Section 4   Source of Funds for Loan . . . . . . . . . . . . . . 53
   Section 5   Conditions of Loan . . . . . . . . . . . . . . . . . 53
   Section 6   Crediting of Repayment . . . . . . . . . . . . . . . 53
   Section 7   Cessation of Payments on Loan  . . . . . . . . . . . 54
   Section 8   Loans to Former Members and Beneficiaries  . . . . . 55

<PAGE>

 ARTICLE IX    ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . 56
   Section 1   Board of Directors . . . . . . . . . . . . . . . . . 56
   Section 2   Trust Agreement. . . . . . . . . . . . . . . . . . . 58

 ARTICLE X     MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . 59
   Section 1   General Limitations  . . . . . . . . . . . . . . . . 59
   Section 2   Top Heavy Provisions   . . . . . . . . . . . . . . . 61
   Section 3   Information and Communications   . . . . . . . . . . 64
   Section 4   Small Account Balances   . . . . . . . . . . . . . . 64
   Section 5   Amounts Payable to Incompetents,
                 Minors or Estates  . . . . . . . . . . . . . . . . 64
   Section 6   Non-alienation of Amounts Payable  . . . . . . . . . 64
   Section 7   Unclaimed Amounts Payable  . . . . . . . . . . . . . 65
   Section 8   Leaves of Absence  . . . . . . . . . . . . . . . . . 65
   Section 9   Return of Contributions to Employer  . . . . . . . . 66
   Section 10  Controlling Law  . . . . . . . . . . . . . . . . . . 66

 ARTICLE XI    TERMINATION OF EMPLOYER PARTICIPATION  . . . . . . . 67
   Section 1   Termination by Employer  . . . . . . . . . . . . . . 67
   Section 2   Termination by Board   . . . . . . . . . . . . . . . 67
   Section 3   Termination Distribution   . . . . . . . . . . . . . 67

 ARTICLE  XII  AMENDMENT OR TERMINATION OF THE PLAN AND
                 TRUST  . . . . . . . . . . . . . . . . . . . . . . 70

 TRUSTS ESTABLISHED UNDER THE PLAN  . . . . . . . . . . . . . . . . 72

 APPENDIX A     . . . . . . . . . . . . . . . . . . . . . . . . . . 73

<PAGE>

                                   PURPOSE

     The purpose of the Financial Institutions Thrift Plan (the "Plan") is to
provide Members of participating Employers with a convenient way to save on a
regular and long-term basis and, in addition to, or in lieu of such benefit, a
benefit under a Profit Sharing Feature, all as elected by the Employer, and as
set forth herein and in the Trust Agreement adopted as a part of this Plan.
This Plan, as hereby amended and restated, and the Trust established
hereunder, are intended to qualify as a plan and trust which meet the
requirements of Sections 401(a), 401(k), and 501(a), respectively, of the
Internal Revenue Code of 1986, as now in effect or hereafter amended, or any
other applicable provisions of law including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended.

                                       i
<PAGE>

                            ARTICLE I DEFINITIONS


           The following words and phrases as used in this Plan
shall have the following meanings:

1.    "Account" means the Plan account established and maintained in respect
      of each Member pursuant to Article V, including the Member's 401(k)
      Account, Regular Account, Rollover Account (including Profit Sharing
      Rollover Amounts) and Profit Sharing Account.

2.    "Basic Amounts" means, with respect to a Member, the contributions made
      on behalf of the Member by the Employer pursuant to Article III, Section
      2(B) and earnings thereon.

3.    "Beneficiary" means the person or persons designated to receive any
      amount payable under the Plan upon the death of a Member.  Such
      designation may be made or changed only by the Member on a form provided
      by, and filed with, the Board prior to his death.  If the Member is not
      survived by a Spouse and if no Beneficiary is designated, or if the
      designated Beneficiary predeceases the Member, then any such amount
      payable shall be paid to such Member's estate upon his death.

4.    "Board" means the Board of Directors provided for in Article IX, Section
       1.

5.    "Break in Service" means a Plan Year during which an individual has not
      completed more than 500 Hours of Employment, as determined by the Board
      in accordance with the IRS Regulations.  Solely for purposes of
      determining whether a Break in Service has occurred, an individual shall
      be credited with the Hours of Employment which such individual would
      have completed but for a maternity or paternity absence, as determined
      by the Board in accordance with this Article I, Paragraph (5), the Code
      and the applicable regulations issued by the DOL and the IRS; provided,
      however, that the total Hours of Employment so credited shall not exceed
      501 and the individual timely provides the Board with such information
      as it may require.  Hours of Employment credited for a maternity or
      paternity absence shall be credited entirely (i) in the Plan Year in
      which the absence began if such hours of Employment are necessary to
      prevent a Break in Service in such year, or (ii) in the following Plan
      Year.  For purposes of this Article I, Paragraph (5), maternity or
      paternity absence shall mean an absence from work by reason of the
      individual's pregnancy, the birth of the individual's child or the
      placement of a child with the individual in connection with the adoption
      of the child by such individual, or for purposes of caring for a child
      for the period immediately following such birth or placement.

<PAGE>

6.    "Code" means the Internal Revenue Code of 1986, as now in effect or as
      hereafter amended.  All citations to sections of the Code are to such
      sections as they may from time to time be amended or renumbered.

7.    "Commencement Date" means the date on which an Employer begins to
      participate in the Plan.

8.    "Contribution Determination Period" means the Plan Year, fiscal year, or
      calendar or fiscal quarter, as elected by an Employer, upon which
      eligibility for and the maximum permissible amount of any contribution
      to the Profit Sharing Feature, as defined in Article III, Section 8, is
      determined.  Notwithstanding the foregoing, for purposes of Article VI,
      Section 2(B)(2), Contribution Determination Period means the Plan Year.

9.    "Disability" means a Member's disability as defined in Article VII,
      Section 4.

10.   "DOL" means the United States Department of Labor.

11.   "Employee" means any person in the Employment of, and who receives a
      salary from, an Employer, and any leased employee within the meaning of
      Section 414(n)(2) of the Code, but excluding, at the election of the
      Employer, any employee not paid on a salaried basis provided the
      Employer continues to satisfy the applicable Code Section 410(b)
      coverage test following such exclusion.  Notwithstanding the foregoing,
      if such leased employees constitute less than twenty percent (20%) of
      the Employer's nonhighly compensated workforce within the meaning of
      Section 414(n)(5)(C)(ii) of the Code, such leased employees are not
      Employees if they are covered by a plan meeting the requirements of
      Section 414(n)(5)(B) of the Code.  A director of the Employer is not
      eligible to participate in the Plan unless he is also an Employee.

12.   "Employer" means any entity which has adopted the Plan in accordance
      with Article II, Section 1.

13.   "Employment" means all periods of service with an Employer commencing
      with the Employee's first day of employment or reemployment  and ending
      on the date a break in service begins.  The first day of employment or
      reemployment is the first day the Employee performs an hour of service.
      An Employee will also receive credit for any period of severance
      of less than 12 consecutive months.  Fractional periods of a year will
      be expressed in terms of days.

      For purposes of this Section (13), hour of service shall mean each hour
      for which an Employee is paid or entitled to payment for the performance
      of duties for an Employer.

                                       -2-
<PAGE>

      Break in service is a period of severance of at least 12 consecutive
      months.

      Period of severance is a continuous period of time during which the
      Employee is not employed by an Employer.  Such period begins on the date
      the Employee retires, quits or is discharged, or if earlier, the 12
      month anniversary of the date on which the Employee was otherwise first
      absent from service.

      If an Employer is a member of an affiliated service group (under Section
      414(m) of the Code), a controlled group of corporations (under Section
      414(b) of the Code), a group of trades or businesses (under Section
      414(c) of the Code), or any other entity required to be aggregated with
      the Employer pursuant to section 414(o) of the Code, service will be
      credited for any employment for any period of time for any other member
      of such group.  Service will also be credited for any individual
      required under section 414(n) or section 414(o) to be considered an
      employee of any Employer aggregated under section 414(b), (c), or (m).

      In the case of an Employee who is absent from work for maternity or
      paternity reasons, the 12-consecutive month period beginning on the
      first anniversary of the first date of such absence shall not constitute
      a break in service.  For purposes of this paragraph, an absence from
      work for maternity or paternity reasons means an absence (1) by reason
      of the pregnancy of the Employee, (2) by reason of the birth of a child
      of the Employee, (3) by reason of the placement of a child with the
      Employee in connection with the adoption of such child by such Employee,
      or (4) for purposes of caring for such child for a period beginning
      immediately following such birth or placement.

      Solely for purposes of determining vesting, "Employment" shall include
      service performed by an individual for an Employer or members of an
      affiliated service group (under Code Section 414(m)), a controlled group
      of corporations (under Code Section 414(b)), or a group of trades or
      businesses under common control (under Code Section 414(c)), of which
      the Employer is a member, during the period such individual is not a
      member of a class of Employees otherwise eligible to participate in the
      Plan.

14.   "Enrollment Date" means the date on which an Employee becomes a Member
      as provided under Article II, Section 2.

15.   "ERISA" means the Employee Retirement Income Security Act of 1974, as
      now in effect or as hereafter amended.

16.   "401(k) Account" means the Plan account established and maintained in
      respect of a Member pursuant to Article III, Section 4 and Article V,
      and shall include all amounts (and

                                       -3-
<PAGE>

      earnings thereon) credited thereto on behalf of the Member pursuant to
      the provisions of Article III.

17.   "Highly Compensated Employee" or "Highly Compensated Member" means an
      Employee or Member who is employed during the determination year and who
      during the look-back year:  (i) received compensation from the Employer
      in excess of $75,000 (as adjusted pursuant to Section 415(d) of the
      Code); or (ii) received compensation from the Employer in excess of
      $50,000 (as adjusted pursuant to Section 415(d) of the Code) and was
      a member of the top-paid group as defined in Section 414(q) of the Code
      for such year; or (iii) was an officer of the Employer and received
      compensation during such year that is greater than 50 percent of the
      dollar limitation in effect under Section 415(b)(1)(A) of the Code.  The
      term Highly Compensated Employee also includes:  (i) employees who are
      both described in the preceding sentence if the term "determination
      year" is substituted for the term "look-back year" and the employee is
      one of the 100 employees who received the most compensation from the
      Employer during the determination year; and (ii) employees who are 5
      percent owners at any time during the look-back year or determination
      year.

      If no officer has satisfied the compensation requirement of (iii) above
      during either a determination year or look-back year, the highest paid
      officer for such year shall be treated as a Highly Compensated Employee.

      For this purpose, the determination year shall be the Plan Year.  The
      look-back year shall be the twelve-month period immediately preceding
      the determination year.

      If an Employee is, during a determination year or look-back
      year, a family member of either a 5 percent owner who is an
      active or former Employee or a Highly Compensated Employee
      who is one of the 10 most highly compensated Employees ranked
      on the basis of compensation paid by the Employer during such
      year, then the family member and the 5 percent owner or
      top-ten Highly Compensated Employee shall be aggregated.  In
      such case, the family member and 5 percent owner or top-ten
      Highly Compensated Employee shall be treated as a single
      Employee receiving compensation and plan contributions or
      benefits equal to the sum of such compensation and
      contributions or benefits of the family member and 5 percent
      owner or top-ten Highly Compensated Employee.  For purposes
      of this Paragraph, family member includes the spouse, lineal
      ascendants and descendants of the Employee or former Employee
      and the spouses of such lineal ascendants and descendants.

      The determination of who is a Highly Compensated Employee,
      including the determinations of the number and identity of
      Employees in the top-paid group, the top 100 Employees, the

                                       -4-
<PAGE>

      number of Employees treated as officers and the compensation
      that is considered, will be made in accordance with Section
      414(q) of the Code and the IRS Regulations thereunder.

18.   "Hour of Employment"  means

           (A)  Each hour for which an Employee is paid, or
      entitled to payment, for the performance of duties for an
      Employer.  These hours will be credited to the Employee for
      the computation period in which the duties are performed; and

           (B)  Each hour for which an Employee is paid, or
      entitled to payment, by an Employer on account of a period of
      time during which no duties are performed (irrespective of
      whether the employment relationship has terminated) due to
      vacation, holiday, illness, incapacity (including
      disability), layoff, jury duty, military duty or leave of
      absence.  No more than 501 Hours of Employment will be
      credited under this Subsection (B) for any single continuous
      period (whether or not such period occurs in a single
      computation period).  Hours under this Subsection (B) will be
      calculated and credited pursuant to Section 2530.200b-2 of
      the DOL Regulations which is incorporated herein by this
      reference; and

          (C)  Each hour for which back pay, irrespective of
      mitigation of damages, is either awarded or agreed to by an
      Employer.  The same Hours of Employment will not be credited
      both under Subsection (A) or (B), as the case may be, and
      under this Subsection (C).  These hours will be credited to
      the Employee for the computation period or periods to which
      the award or agreement pertains rather than the computation
      period in which the award, agreement or payment is made.

                Hours of Employment will be credited for employment
      with other members of an affiliated service group (under Code
      Section 414(m)), a controlled group of corporations (under
      Code Section 414(b)), or a group of trades or businesses
      under common control (under Code Section 414(c)), of which
      the Employer is a member, and any other entity required to be
      aggregated with such Employer pursuant to Code Section
      414(o).

                 Hours of Employment will also be credited for any
      individual considered an Employee for purposes of the Plan
      under Code Section 414(n) or Section 414(o).

                 Solely for purposes of determining eligibility to
      participate, "Hour of Employment" shall include service
      performed by an individual for an Employer or members of an
      affiliated service group (under Code Section 414(m)), a
      controlled group of corporations (under Code Section 414(b)),
      or a group of trades or businesses under common control
      (under Code Section 414(c)), of which the Employer is a
      member, during the period such individual is

                                       -5-
<PAGE>

      not a member of a class of Employees otherwise eligible to
      participate in the Plan.

19.   "IRS" means the United States Internal Revenue Service.

20.   "Leave of Absence" means an absence authorized by an
      Employee's Employer on a uniform basis, in accordance with
      Article X, Section 8.

21.   "Matching Amounts" means, with respect to a Member, the
      contributions made on behalf of the Member by the Employer
      pursuant to Article III, Section 2(A) and earnings thereon.

22.   "Member" means an Employee enrolled in the membership of the
      Plan under Article II, Section 2.  Notwithstanding the
      foregoing, Member shall include a former Member, except for
      purposes of Article III (other than Section 6 thereof) of the
      Plan.

23.   "Month" means any calendar month.

24.   "Normal Retirement Age" means the Member's sixty-fifth (65th)
      birthday.

25.   "Plan" means the Financial Institutions Thrift Plan
      established herein and as from time to time amended.

26.   "Plan Year" means a 12-month period ending December 31.

27.   "Profit Sharing Account" means the Plan account established
      in respect of each Member pursuant to Article III, Section
      8(B)(2) and Article V which shall be maintained separate from
      any other Account established in respect of such Member under
      the Plan.  Except as otherwise indicated under the Plan, a
      Member's Profit Sharing Account shall not include his Profit
      Sharing Rollover Amounts.

28.   "Profit Sharing Rollover Amounts" means, with respect to an
      Employee or Member whose Employer participates in the Plan
      solely under Article III, Section 8 (Profit Sharing Feature),
      any amounts (and earnings thereon) transferred or contributed
      on behalf of such Employee or Member pursuant to Article III,
      Section 6(C).

29.   "Regular Account" means the Plan account established and
      maintained in respect of a Member pursuant to Article III,
      Section 2(C) and Article V, and shall include all amounts
      (and earnings thereon) credited thereto on behalf of the
      Member pursuant to the provisions of Article III.

30.   "Regulations" means the applicable regulations issued under the
      Code, ERISA or other applicable law, by the IRS, the DOL or any
      other governmental authority and any proposed or temporary

                                       -6-
<PAGE>

      regulations or rules promulgated by such authorities pending the
      issuance of such regulations.

31.   "Rollover Account" means the Plan account established in
      respect of each Member pursuant to Article III, Section 6(C)
      and Article V which shall be maintained separate from any
      other Account established in respect of such Member under the
      Plan.  For purposes of Article III, Section 4(H), Article
      VII, Sections 1 and 2, and Article VIII, a Member's Rollover
      Account shall not include his Profit Sharing Rollover
      Amounts, unless otherwise indicated therein.

32.   "Salary" means regular basic monthly salary or wages,
      exclusive of special payments such as overtime, bonuses,
      fees, deferred compensation (other than amounts deferred
      pursuant to a Member's election under Article III, Section
      4), severance payments, and contributions by the Employer
      under this or any other plan (other than before-tax
      contributions made on behalf of a Member under a Code Section
      125 cafeteria plan, unless the Employer specifically elects
      to exclude such contributions).  Commissions shall be
      included at the Employer's option within such limits, if any,
      as may be set by the Employer and applied uniformly to all
      its commission Employees.  In addition, Salary may also
      include, at the Employer's option, special payments such as
      (i) overtime or (ii) overtime plus bonuses.  If an Employer
      elects to include the special payments enumerated in (i) or
      (ii) above in the definition of Salary (or, if the Employer
      adopts the Plan after December 31, 1992 and elects to include
      commissions in the definition of Salary), such Salary shall
      be determined based on the amounts received by the Member
      during the relevant determination period.  Otherwise, unless
      an Employer specifically requests to include Salary changes
      received by a Member during the relevant determination period
      and is granted permission by the Board, a Member's monthly
      Salary rate is one-twelfth of his annual Salary rate as of
      each January 1.  If commissions are included in Salary,
      unless an Employer specifically requests to include
      commissions received by a Member during the relevant
      determination period and is granted permission by the Board,
      they shall be calculated on a uniform basis based on the
      commissions received by the Member during the 12-month period
      prior to the determination period.  As an alternative to the
      foregoing definition, at the Employer's option, Salary may be
      defined to include total taxable compensation reported on the
      Member's IRS Form W-2, plus deferrals, if any, pursuant to
      Section 401(k) of the Code and pursuant to Section 125 of the
      Code (unless the Employer specifically elects to exclude such
      Section 125 deferrals), but excluding compensation deferred
      from previous years.  In no event, may a Member's Salary for
      any Plan Year exceed for purposes of the Plan $200,000 or,
      effective January 1, 1994, $150,000 (adjusted for cost of
      living to the extent permitted by the Code and the IRS
      Regulations).

                                       -7-
<PAGE>

      In determining the Salary for a Member for purposes of the
      dollar limitation described in the preceding sentence, the
      rules of Section 414(q)(6) of the Code shall apply, except
      that in applying such rules the term "family" shall include
      only the spouse of the Member and any lineal descendants of
      the Member who have not attained age 19 before the close of
      the year.

33.   "Spouse" or "Surviving Spouse" means the individual to whom a
      Member or former Member was married on the date such Member
      withdraws his Account, or if such Member has not withdrawn
      his Account, the individual to whom the Member or former
      Member was married on the date of his death.

34.   "Supplemental Amounts" means, with respect to a Member, the
      contributions made on behalf of the Member by the Employer
      pursuant to Article III, Section 3 and earnings thereon.

35.   "Trustee" means the Trustee or Trustees provided for in
      Article IX, Section 2.

36.   "Trust Fund" means the Trust Fund or Funds established by the
      Trust Agreement or Agreements provided for in Article IX,
      Section 2.

37.   "Unit" means the unit of measure described in Article V of a
      Member's proportionate interest in Investment Funds A, B, C,
      D and E.

38.   "Valuation Date" means the last business day of any month for
      the Trustee, except that in the event the underlying
      portfolios of any Investment Fund cannot be valued on such
      date, the Valuation Date for such Investment Fund shall be
      the next subsequent date on which the underlying portfolio(s)
      can be valued.  Valuations shall be made as of the close of
      business on such valuation date(s).

39.   "Year of Employment" means a 12-month period of Employment.

40.   "Year of Service" means any Plan Year during which an
      individual completed at least 1,000 Hours of Employment, or
      satisfied any alternative requirement, as determined by the
      Board in accordance with any applicable regulations issued by
      the DOL and the IRS.

41.   The masculine pronoun wherever used shall include the
      feminine pronoun.

                                       -8-
<PAGE>

                 ARTICLE II PARTICIPATION AND MEMBERSHIP

Section 1.  Employer Participation.

Any financial institution, or other organization serving it, may apply to the
Board for participation in the Plan if:  (A) as of its Commencement Date and
in accordance with Section 410(b) of the Code and the IRS Regulations (i) the
percentage of Nonhighly Compensated Employees who will benefit under the Plan
is at least 70% of the percentage of Highly Compensated Employees who will
benefit under the Plan (excluding such employees as are permitted to be
excluded under IRS Regulations), or (ii) the average benefit percentage test
(as defined in Section 410(b)(2) of the Code and the IRS Regulations) will be
satisfied with respect to the Employer, and (B) as of its Commencement Date
and in accordance with Section 401(a)(26) of the Code and the IRS Regulations,
at least 50 (or, if a lesser number results, 40%) of the Employer's Employees
will benefit under the Plan.  The applicant shall submit the formal
application and all required information, and the Board, in its discretion,
shall decide upon admittance and determine the Commencement Date.  The Board
may, in its discretion and at such times as it may determine, require an
affirmative showing by an Employer of its continued compliance with the
requirements of Section 410(b) and Section 401(a)(26) of the Code and IRS
Regulations.  Initial and continued participation shall be subject to the
determination of the IRS that the Plan and the Trust Fund are tax-qualified
and tax-exempt under Sections 401(a) and 501(a) of the Code, respectively.  In
addition, any Employee who participated in the Plan but who has been
transferred to a governmental or quasi-governmental agency serving the
financial industry shall, notwithstanding anything to the contrary in this
Section, be permitted to continue to participate in the Plan; provided that,
in such case, such Employee's employing agency has adopted the Plan.

Section 2.  Employee Membership.

(A)   Employer contributions on behalf of any Member shall be
      conditioned upon the Member making contributions under
      Article III, Section 1, except in the case of the basic
      contribution feature described in Article III, Section 2, the
      supplemental contribution feature (Formula (2)) described in
      Article III, Section 3, the 401(k) Feature described in
      Article III, Section 4(B) or the Profit Sharing Feature
      described in Article III, Section 8.

(B)   Every Employee (other than non-salaried Employees who, at the
      election of the Employer, are excluded from participation)
      shall be eligible for membership in the Plan on the later of:

      (1)  His Employer's Commencement Date, or

                                       -9-
<PAGE>

(2)  The first day of the month coincident with or next
     following his satisfaction of one or more of the
     eligibility requirements described hereunder, as
     designated by his Employer:  (i) the completion of any
     number of months not to exceed 12 consecutive months or
     (ii) the completion of one Year of Service or two Years
     of Service, and/or (iii) if the Employer so elects, it
     may adopt a minimum age requirement of age 21.  The
     eligibility requirement(s) designated by the Employer
     shall apply uniformly to all Plan Features elected by
     the Employer.  An Employer, at its election and in a
     uniform and nondiscriminatory manner, may waive the
     eligibility requirement(s) for participation specified
     under this paragraph (B) for (1) all Employees, or (2)
     all those Employees employed on or up to 12 months
     after the Employer's Commencement Date under the Plan.
     Subject to the requirements of the Code, where an
     Employee who participated as a Member under the Plan
     terminates employment with an Employer and thereafter
     is reemployed by the same (or a different) Employer,
     such Employee, subject to any applicable break in
     service rules, shall participate immediately upon
     returning to employment with respect to the Profit
     Sharing Feature and the Basic and Supplemental Employer
     Contribution and shall participate on the next
     applicable payroll date with respect to Member
     Contributions, Matching Employer Contributions and the
     401(k) Feature, as and to the extent any such
     contribution feature is then maintained by such
     Employee's Employer.  In the case of an Employer that
     adopts a 401(k) Feature under Article III, Section 4,
     the eligibility requirement(s) under such Feature, and
     any other Plan Feature adopted by the Employer in
     addition to the 401(k) Feature, shall be identical and
     shall not exceed the period described in clause (i)
     above, and, at the election of the Employer, attainment
     of age 21 as described in clause (iii) above.  In the
     event a Member is no longer part of an eligible class
     of Employees and thus becomes ineligible to participate
     in the Plan, such Employee, subject to any applicable
     break in service rules, shall participate immediately
     upon returning to an eligible class of Employees with
     respect to the Profit Sharing Feature and the Basic and
     Supplemental Employer Contribution and shall
     participate on the next applicable payroll date with
     respect to Member Contributions, Matching Employer
     Contributions and the 401(k) Feature, as and to the
     extent any such contribution feature is then maintained
     by such Employee's Employer.

     For purposes of this Section and all purposes under the
     Plan, an Employee who is employed on an hourly basis
     following the adoption date of the Plan by the Employer,
     but prior to the adoption of an hourly exclusion by his

                                       -10-
<PAGE>

     Employer, shall continue to be deemed to be an Employee
     and will continue to receive benefits on the same basis
     as a regular salaried Member, despite classification as
     an hourly employee.  In the event an individual who was
     not part of an eligible class of Employees becomes part
     of an eligible class, such individual will be eligible
     to participate in the Plan in accordance with the
     provisions of this Section 2.

(C)   Where an Employer designates a one Year of Service or two
      Years of Service eligibility requirement, an Employee must
      complete at least 1,000 Hours of Employment during each 12-
      consecutive-month eligibility computation period (measured
      from his date of Employment and then from each January 1,
      thereafter).  Where an Employer designates an eligibility
      waiting period of less than 12 months, an Employee must, for
      purposes of eligibility, complete a required number of hours
      (measured from his date of Employment and each anniversary
      thereafter) which is arrived at by multiplying the number of
      months of the eligibility waiting period requirement by 83 ;
      provided, however, if the Employee completes at least 1,000
      Hours of Employment during the 12-consecutive month
      eligibility computation period (measured from his date of
      Employment and then from each January 1 thereafter) the
      Employee shall be deemed to satisfy the eligibility waiting
      period designated by the Employer.

(D)   (1)  The Employer shall notify each Employee of his
           membership in the Plan and shall furnish him with an
           enrollment application in order that he may elect to
           make contributions under Article III, Section 1 or
           elect to defer a percentage of his Salary under the
           401(k) Feature in Article III, Section 4 (if
           applicable) or receive a basic contribution under
           Article III, Section 2, or a Profit Sharing
           contribution under Article III, Section 8 (if
           applicable), at the earliest possible date consonant
           with Paragraph (E) of this Section.

      (2)  All Employees whose Employment commences after the
           expiration date of the Employer's waiver of the
           eligibility requirement(s) shall be enrolled in the
           Plan in accordance with the eligibility requirement(s)
           designated in Paragraph (B) above.

      (3)  The Employer must submit enrollment applications to the
           Board on a monthly basis.

      (4)  If it is determined that an Employee who is eligible to be
           enrolled has, for any reason, not been so notified, such
           Employee shall be furnished an application by his Employer
           and be retroactively enrolled, as of the date he first
           became eligible, upon receipt by the Board of the
           application properly executed.  In such event, the Employee

                                       -11-
<PAGE>

           may, at his election, make any contributions
           which he could have made had he been enrolled on such
           date.  The Employer will be required to make the
           contributions (without Plan earnings thereon) it would
           have made had the Employee been enrolled on such
           earlier date.  The Account of an Employee who is
           retroactively enrolled shall, upon such enrollment,
           consist solely of the number of Units which, as of the
           Valuation Date coincident with or next following such
           enrollment, may be credited to him pursuant to Article
           V based upon the amount of contributions received by
           the Board.

(E)   An Employee shall become a Member on his Enrollment Date
      which shall be the date on which he becomes eligible.
      However, no person shall under any circumstances become a
      Member unless and until his enrollment application is filed
      with, and accepted by, the Plan.  If an Employee fails to
      complete the enrollment form furnished to him, the Employer
      shall do so on his behalf.  In the event the Employer submits
      the enrollment form on behalf of the Employee, the Employee
      shall be deemed to have elected not to make any contributions
      under the Plan.

(F)   At the option of the Employer, an Employee who is employed on
      or prior to his Employer's Commencement Date may make a one
      time election to waive participation in the Plan on the
      Employer's Commencement Date.

(G)   Membership under all provisions of the Plan shall terminate
      upon the earlier of (a) a Member's termination of Employment
      and payment to him of his entire vested interest, or (b) his
      death.

                                       -12-
<PAGE>

                        ARTICLE III CONTRIBUTIONS

Section 1.  Contributions by Members.

Under this Section, a Member of an Employer may elect to make a monthly
contribution under the Plan of 2%, 3%, 4%, 5%, 6%, 7%, 8%,9%, 10%, 11%, or 12%
of his Salary.  In addition, (i) a Member of an Employer that adopts the Plan
after December 31, 1992, and does not elect to make contributions pursuant to
the 401(k) Feature, Option 1, under Section 4(B) of this Article, may elect to
make a monthly contribution under the Plan of 1% of his Salary and (ii)
effective July 1, 1992, a Member whose Employer makes contributions under
Section 2 of this Article, at a matching and/or basic contribution rate such
that the maximum Employer contribution may not exceed 10% of his Salary, may
elect to make a monthly contribution of 13%, 14% or 15% of his Salary.  He may
change his contribution rate or suspend his contributions at any time, but
reduced or suspended contributions may not subsequently be made up.

Section 2.  Regular Contributions by Employer.

(A)   Matching Employer Contributions

      Under this Section, an Employer shall contribute monthly
      under the Plan on behalf of each of its Members (subject to
      any possible suspension under Article VII) an amount equal to
      a percentage (as specified by the Employer) of the Member's
      contributions not in excess of a maximum of 12% (in
      increments of 1% and subject to the further restrictions for
      Formula Step (2), Formula 150 and Formula 200 specified
      below) of his Salary for such month.  The percentage chosen
      by the Employer shall be in accordance with the schedule of
      contribution formulas listed below, and must be uniformly
      applicable to all its Members.

      Formula   0         -    0% of the Member's contributions.
      Formula  25*        -    25% of the Member's contributions.
      Formula  50         -    50% of the Member's contributions.

--------------------
      *  Not available to an Employer which adopts the 401(k)
         Feature under Section 4(B) of this Article.

      ** Not available to an Employer which adopts the 401(k)
         Feature under Section 4(B) of this Article and
         contributes monthly on behalf of each of its Members an
         amount equal to a percentage of the Member's
         contributions not in excess of 3% of his Salary for
         each month.

                                       -13-
<PAGE>

      Formula  75         -   75% of the Member's contributions.
      Formula 100         -  100% of the Member's contributions.
      Formula Step (1)**  -  (i)  50% of the Member's contributions
                                  during the second and third years of
                                  Employment.
                             (ii) 75% of the Member's contributions
                                  during the fourth and fifth years of
                                  Employment.
                            (iii) 100% of the Member's
                                  contributions upon completion
                                  of 5 or more years of
                                  Employment.
Formula Step (2)    -        (i)  100% of the Member's
                                  contributions during the second
                                  and third years of Employment.
                            (ii)  150% of the Member's
                                  contributions during the fourth
                                  and fifth years of Employment.
                           (iii)  200% of the Member's
                                  contributions upon completion
                                  of 5 or more years of
                                  Employment.
Formula 150                    -  150% of the Member's contributions.
Formula 200****        -     200% of the Member's contributions.

(B) Basic Employer Contributions

    Effective January 1, 1993, an Employer may, at its option,
    make a basic contribution equal to a uniform percentage (as
    specified by the Employer) of each of its Members' Salaries
    for each month, provided that in no event shall such
    percentage exceed 15%.  The
--------------------
     *** Not available to an Employer which adopts the 401(k)
         Feature under Section 4(B) of this Article and
         contributes monthly on behalf of each of its Members an
         amount equal to a percentage of the Member's
         contributions not in excess of 2% of his Salary for such month.

    **** Not available to an Employer which contributes monthly
         on behalf of each its Members an amount equal to a percentage of the
         Member's contributions not in excess of 7%, 8%, 9%, 10%,
         11%, 12%, 13%, 14% or 15% of his Salary for each month.

   ***** Not available to an Employer which contributes monthly
         on behalf of each of its Members an amount equal to a
         percentage of the Member's contributions not in excess of 9%,
         10%, 11%, 12%, 13%, 14% or 15% of his Salary each month.

                                       -14-
<PAGE>

    percentage so specified may be elected or changed by the Employer
    by filing a properly completed form with the Thrift Plan Office.
    No more than one such change may be made by an Employer during
    any year.  An employer may restrict the allocation of such basic
    contribution to those Members who were employed with the
    Employer on the last working day of the month for which the
    basic contribution is made.

    At the election of the Employer, any basic contribution shall
    be credited to its Members' 401(k) Accounts or Regular
    Accounts on a uniform basis.

(C) Regular Accounts

    A Regular Account shall be established and maintained for
    each Member on whose behalf contributions are made to the
    Plan pursuant to Section 1 or 2 of this Article.

Section 3.  Supplemental Contributions by Employer.

An Employer may, at its option, make a supplemental contribution
under Formula (1) or (2) below:

Formula (1) - A uniform percentage (as specified by the Employer) of each
Member's contributions which were received by the Plan during the preceding
Plan Year, provided that in no event shall a supplemental contribution under
Formula (1) for any Member exceed 6% of the Member's Salary.  Such
supplemental contribution may be made on or before the last day of February in
any year on behalf of all those Members who were in its employ on the last
working day of the preceding Plan Year.  For purposes of this Section, Members
on a Type 1 non-military Leave of Absence (as defined under Article I,
Paragraph (20) and Article X, Section 8(B)(1)), or a Type 4 military Leave of
Absence (as defined under Article I, Paragraph (20) and Article X, Section
8(B)(4)), shall be deemed employed on the last working day of such preceding
Plan Year.

Formula (2) - A uniform dollar amount per Member (provided that this option
shall not be available prior to December 31, 1992) or a uniform percentage of
each Member's Salary (i) for the preceding Plan Year, regardless of whether
the Member was eligible to participate in the Plan during the entire Plan
Year, or (ii) if an Employer so elects with respect to all of its Members, for
the portion of the preceding Plan Year during which the Member was eligible to
participate in the Plan.  Such supplemental contribution may be made on or
before the last day of February in any year on behalf of all those Members who
were in its employ on the last working day of the preceding Plan Year.  For
purposes of this Section, Members on a Type 1 non-military Leave of Absence
(as defined under Article I, Paragraph (20) and Article X, Section 8(B)(1)),
or a Type 4 military Leave of Absence (as defined under Article I, Paragraph
(20) and Article X, Section 8(B)(4)), shall be deemed employed on the last
working day of such preceding Plan

                                       -15-
<PAGE>

Year.  The percentage contributed under this Formula (2) shall be limited in
accordance with the Employer's matching formula and basic contribution rate
under Section 2 of this Article such that the sum of the Employer's Formula
(2) supplemental contribution plus the Employer basic contribution and the
maximum Employer matching contribution under Section 2 of this Article shall
not exceed 15% of Salary for such year.

At the election of the Employer, any supplemental contribution shall be
credited either to its Members' 401(k) Accounts or Regular Accounts on a
uniform and nondiscriminatory basis.

Section 4.  401(k) Features.

    (A) An Employer may, at its option, adopt either the 401(k)
    Feature under Paragraph (B) of this Section or one of the
    401(k) Features described in Paragraph (C) of this Section.
    Under any 401(k) Feature, there shall be established for each
    of its Members a "401(k) Account."  (For purposes of this
    Section, the "401(k) Account" and the "Regular Account" shall
    comprise the Member's Account as defined in Article I,
    Paragraph (1).)  A Member's 401(k) Account shall be invested
    pursuant to his overall directions under Article IV but
    maintained separately from his Regular Account (consisting of
    the value of contributions made under Sections 1 and 2 of
    this Article).

    (B) Option 1 - Under the 401(k) Feature provided in this
    Paragraph (B), each Member may elect to defer 2%, 3%, 4%, 5%,
    6%, 7%, 8%, 9%, 10%, 11% or 12% of his monthly Salary and
    direct his Employer to contribute such amount to his 401(k)
    Account.  In addition, effective July 1, 1992, a Member whose
    Employer makes contributions under Section 2 of this Article,
    at a matching and/or basic contribution rate such that the
    maximum Employer contribution may not exceed 10% of his
    Salary, may elect a deferral rate of 13%, 14% or 15% of his
    Salary.  Such deferral to the 401(k) Account shall reduce the
    Member's current monthly contribution under Section 1 of this
    Article.

    The Employer shall contribute monthly to each Member's 401(k)
    Account an amount equal to 2% of his monthly Salary not in
    excess of $3,750, subject to Article X, Section 1 of the
    Plan, unless the Member has deferred amounts of his monthly
    Salary pursuant to the preceding paragraph, in which case the
    Employer's 2% contribution will be allocated to the Member's
    Regular Account.  The amount which the Employer would
    otherwise be required to contribute with respect to each
    Member under Section 2 of this Article shall be reduced, but
    not below zero, by the amount which it contributes with
    respect to the Member under this Paragraph (B).
    Notwithstanding anything in this Paragraph to the contrary,
    should a Member's deferrals to the 401(k) Account reach the
    maximum specified under the provisions of Paragraph (I) below
    in any Plan Year, the Employer's 2% contribution will be allocated

                                       -16-
<PAGE>

    to the Member's Regular Account for the remainder
    of such Plan Year.

(C) Effective January 1, 1989, the Employer may no longer elect
    the Monitored 401(k) Feature.  The Monitored 401(k) Feature
    previously required that each Member's contributions made
    under Section 1 of this Article, up to 6% (or, at the
    election of the Employer, up to 3%) of his Salary, shall be
    allocated to the Member's 401(k) Account.  If the Member
    contributed an amount in excess of 6% (or, at the election of
    the Employer, in excess of 3%) of his Salary, the Member was
    permitted to allocate such excess contributions to his 401(k)
    or Regular Account in increments of 1% of his Salary.

    Commencing effective January 1, 1989, the Employer, at its
    option, may adopt either of the two additional 401(k)
    Features described below:

    Option 2 - Under this Feature, each Member, at his election,
    may make deferrals to his 401(k) Account and/or contributions
    to his Regular Account, in the amounts specified in Article
    III, Section 4(B), and Article III, Section 1, respectively.
    Such amounts may be allocated between the 401(k) Account
    and/or the Regular Account based on multiples of 1%.

    If so adopted, Employer contributions under the Plan, which
    shall be made monthly on behalf of each Member in an amount
    equal to a percentage of the Member's deferrals to his 401(k)
    Account and contributions to his Regular Account as specified
    by the Employer under Section 2 of Article III (in 1%
    increments ranging from 1% to 15%) of his Salary for such
    month, shall first be allocated to a Member's 401(k) Account
    until total Member deferrals and Employer contributions
    allocated to the Member's 401(k) Account equal a percentage
    specified by the Employer not in excess of 15%.  Thereafter,
    the Employer contributions, with respect to both Member
    401(k) deferrals and Regular contributions, shall be
    contributed to the Member's Regular Account in an amount
    pursuant to the percentage elected in the preceding sentence.

    Notwithstanding the Employer election made under this Option
    2, if the Member has deferred amounts of his monthly Salary
    equal to the maximum specified under the provisions of
    Paragraph (I) below, the Employer shall contribute the
    remaining Employer contributions to the Member's Regular
    Account.

    Option 3 - Under this Feature each Member may make deferrals to
    his 401(k) Account, but not contributions to his Regular Account.
    Each Member may elect to defer 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%,
    10%, 11% or 12% of his monthly Salary and direct his Employer to
    contribute such amount to his 401(k) Account. In addition, (i) a
    Member of an Employer that adopts the Plan after December 31,
    1992, may elect a deferral rate of 1% of his Salary and (ii)

                                       -17-
<PAGE>

    effective July 1, 1992, a Member whose Employer makes contributions
    under Section 2 of this Article, at a matching and/or basic
    contribution rate such that the maximum Employer contribution
    may not exceed 10% of his Salary, may elect a deferral rate of
    13%, 14% or 15% of his Salary.  The Employer shall contribute
    monthly under the Plan on behalf of each Member an amount equal
    to a percentage, specified by the Employer under Section 2 of
    Article III, of the Member's deferrals to his 401(k) Account.
    The Employer's  contributions under this Feature shall be made
    to the Member's Regular Account.

(D) Notwithstanding any other provision of this Section 4, the
    actual deferral percentages for the Plan Year for Highly
    Compensated Employees shall not exceed the greater of the
    following actual deferral percentages:  (a) the actual
    deferral percentage for such Plan Year of those Employees who
    are not Highly Compensated Employees multiplied by 1.25; or
    (b) the actual deferral percentage for the Plan Year of those
    Employees who are not Highly Compensated Employees multiplied
    by 2.0, provided that the actual deferral percentage for the
    Highly Compensated Employees does not exceed the actual
    deferral percentage for such other Employees by more than 2
    percentage points.  For purposes of this Section 4, the
    "actual deferral percentage" for a Plan Year means, for each
    specified group of employees, the average of the ratios
    (calculated separately for each Employee in such group) of
    (a) the amount of deferrals and/or contributions made to the
    Member's 401(k) Account for the Plan Year, to (b) the amount
    of the Member's compensation (as defined in Section 414(s) of
    the Code) which, at the Employer's election, shall include
    the compensation required to be reported under Section 6041
    or 6051 of the Code (i.e., "W-2 compensation") for the Plan
    Year or, alternatively, where specifically elected by the
    Employer, for only that part of the Plan Year during which
    the Member was eligible to participate in the Plan.  An
    Employee's actual deferral percentage shall be zero if no
    401(k) deferral or contribution is made on his behalf for
    such Plan Year.  If the Plan and one or more other plans
    which include cash or deferred arrangements are considered as
    one plan for purposes of Sections 401(a)(4) and 410(b) of the
    Code, the cash or deferred arrangements included in such
    plans shall be treated as one arrangement for purposes of
    this Section 4.  For purposes of determining the actual
    deferral percentage of a Member who is a Highly Compensated
    Employee subject to the family aggregation rules of Section
    414(q)(6) of the Code because such Employee is either a
    five-percent owner or one of the ten most Highly Compensated
    Employees as described in Section 414(q)(6) of the Code, the
    401(k) deferrals, contributions and compensation (as defined
    in Section 414(s) of the Code) of such Member shall include
    401(k) deferrals, contributions and compensation (as defined
    in Section 414(s) of the Code) of "family members", within
    the meaning of Section 414(q)(6) of the Code, and such
    "family members" shall not be considered as separate Employees in

                                       -18-
<PAGE>

    determining actual deferral percentages.  In accordance with
    IRS Regulations, the actual deferral percentage of a Member
    who is a Highly Compensated Employee and who is eligible to
    participate in two or more cash or deferred arrangements
    maintained by his Employer shall be determined by treating
    all such cash or deferred arrangements as a single arrangement.

(E) The Thrift Plan Office shall determine as of the end of the
    Plan Year whether one of the actual deferral percentage tests
    specified in Paragraph (D) above is satisfied for such Plan
    Year.  This determination shall be made after first
    determining the treatment of excess deferrals within the
    meaning of Section 402(g) of the Code under Paragraph (I)
    below.  In the event that neither of such actual deferral
    percentage tests is satisfied, the Thrift Plan Office shall,
    to the extent permissible under the Code and the IRS
    Regulations, refund the excess contributions for the Plan
    Year in the following order of priority:  by (i) refunding
    such amounts deferred by the Member and allocated to his
    401(k) Account which were not matched by his Employer (and
    any earnings and losses allocable thereto), and (ii)
    refunding amounts deferred for such Plan Year by the Member
    and allocated to his 401(k) Account (and any earnings and
    losses allocable thereto) and, in accordance with the Code
    and applicable IRS Regulations, forfeiting the amounts
    contributed for such Plan Year by the Employer with respect
    to the Member's 401(k) deferrals that are returned pursuant
    to this Paragraph (and any earnings and losses allocable
    thereto).  The distribution of such excess contributions
    shall be made to Highly Compensated Members to the extent
    practicable before the 15th day of the third month
    immediately following the Plan Year for which such excess
    contributions were made, but in no event later than the end
    of the Plan Year following such Plan Year or, in the case of
    the termination of the Plan in accordance with Article XII or
    termination of Employer participation in the Plan in
    accordance with Article XI, no later than the end of the
    twelve-month period immediately following the date of such
    termination.  For purposes of this Section 4, "excess
    contributions" means, with respect to any Plan Year, the
    excess of the aggregate amount of 401(k) deferrals and/or
    contributions (and any earnings and losses allocable thereto)
    made to the 401(k) Accounts of Highly Compensated Members for
    such Plan Year, over the maximum amount of such deferrals
    and/or contributions that could be made to the 401(k)
    Accounts of such Members without violating the requirements
    of Paragraph (D) above, determined by reducing 401(k)
    deferrals and/or contributions made by or on behalf of Highly
    Compensated Members in order of the actual deferral
    percentages beginning with the highest of such percentages.
    The distribution of excess contributions shall be made to
    Highly Compensated Members on the basis of the respective
    portions of the excess contributions attributable to each
    such Member.  Excess contributions of Members who are subject
    to the family member aggregation rules shall be allocated
    among the family

                                       -19-
<PAGE>

    members in proportion to the 401(k) deferrals (and amounts
    treated as 401(k) deferrals) of each family member that are
    aggregated to determine the combined actual deferral percentages.

    (F) Notwithstanding any other provision of the Plan, the sum of
    the actual deferral percentage determined in accordance with
    Paragraph (D) above of those Employees who are Highly
    Compensated Employees and the actual contribution percentage
    determined in accordance with Section 7 of this Article III
    of those Employees who are Highly Compensated Employees may
    not exceed the aggregate limit as determined below.

For purposes of this Section 4, the "aggregate limit" for a Plan
Year is the greater of:

(1) The sum of:

    (a)  1.25 times the greater of the relevant actual deferral
         percentage or the relevant actual contribution
         percentage, and

    (b)  Two percentage points plus the lesser of the relevant
         actual deferral percentage or the relevant actual
         contribution percentage.  In no event, however, shall
         this amount exceed twice the lesser of the relevant
         actual deferral percentage or the relevant actual
         contribution percentage; or

(2) The sum of:

    (a)  1.25 times the lesser of the relevant actual deferral
         percentage or the relevant actual contribution
         percentage, and

    (b)  Two percentage points plus the greater of the relevant
         actual deferral percentage or the relevant actual
         contribution percentage.  In no event, however, shall
         this amount exceed twice the greater of the relevant
         actual deferral percentage or the relevant actual
         contribution percentage; provided, however, that if a
         less restrictive limitation is prescribed by the IRS,
         such limitation shall be used in lieu of the foregoing.
         The relevant actual deferral percentage and relevant
         actual contribution percentage are defined in
         accordance with the Code and the IRS Regulations.

    The Thrift Plan Office shall determine as of the end of the
    Plan Year whether the aggregate limit has been exceeded.
    This determination shall be made after first determining the
    treatment of excess deferrals within the meaning of Section
    402(g) of the Code under Paragraph (I) below, then

                                       -20-
<PAGE>

    determining the treatment of excess contributions under
    Paragraph (E) above, and then determining the treatment of
    excess aggregate contributions under Section 7 of this
    Article III.  In the event that the aggregate limit is
    exceeded, the actual contribution percentage of those
    Employees who are Highly Compensated Employees shall be
    reduced in the same manner as described in Section 7 of this
    Article until the aggregate limit is no longer exceeded,
    unless the Thrift Plan Office designates, in lieu of the
    reduction of the actual contribution percentage a reduction
    in the actual deferral percentage of those Employees who are
    Highly Compensated Employees, which reduction shall occur in
    the same manner as described in Section 4(E) of this Article
    until the aggregate limit is no longer exceeded.

(G) Notwithstanding the provisions of Paragraphs (D) and (E)
    above, the amount of excess contributions to be distributed
    pursuant to Paragraph (E) above, with respect to a Member for
    a Plan Year, shall be reduced by any excess deferrals
    distributed to such Member for such Plan Year pursuant to
    Paragraph (I) below.

(H) A withdrawal from the vested portion of a Member's 401(k)
    Account may be made only upon (a) attainment of age 59 1/2, (b)
    hardship (as determined by the Board in accordance with this
    Paragraph (H)), (c) termination of Employment, (d) death, (e)
    Disability or (f) termination of an Employer's participation
    in the Plan provided the Employer certifies in writing in
    such form as is satisfactory to counsel that no successor
    defined contribution plan (other than an employee stock
    ownership plan as defined in Section 4975(e)(7) of the Code)
    will be established or maintained by the Employer at the time
    of termination of participation in the Plan or will be
    maintained through the period ending twelve months after
    distribution of all assets from the Plan attributable to the
    Employer's participation in the Plan and amounts distributed
    upon such event shall be in the form of a "lump sum
    distribution" within the meaning of Section 402(e)(4) of the
    Code (without regard to Code Sections 402(e)(4)(A)(i)-(iv)
    and Code Sections 402(e)(4)(B) and (H)).

    A withdrawal is on account of hardship only if the distribution
    is both made on account of an immediate and heavy financial need
    of the Member and is necessary to satisfy such financial need,
    and further provided that no earnings in the Member's 401(k)
    Account credited on or after January 1, 1989 and/or Employer
    contributions made to the Member's 401(k) Account on or after
    January 1, 1989 may be distributed in satisfying such need.  For
    the purposes of this Paragraph (H), the term "immediate and heavy
    financial need" shall be limited to the need of funds for (i) the
    payment of medical expenses described in Section 213(d) of the
    Code previously incurred by the Member, the Member's Spouse, or
    any of the Member's dependents (as defined in Section 152 of the
    Code) or necessary for those persons to obtain such care, (ii)
    the payment of tuition for the next twelve months of
    post-secondary education of the Member, the Member's Spouse, the

                                       -21-
<PAGE>

    Member's children, or any of the Member's dependents (as defined in
    Section 152 of the Code), (iii) the purchase (excluding mortgage
    payments) of a principal residence for the Member, or (iv) the
    prevention of eviction of the Member from his principal residence
    or the prevention of foreclosure on the mortgage of the Member's
    principal residence.  For purposes of this Paragraph (H), a
    distribution generally may be treated as "necessary to
    satisfy a financial need" if the Employer reasonably relies
    upon the Member's written representation that the need cannot
    be relieved (i) through reimbursement or compensation by
    insurance or otherwise, (ii) by reasonable liquidation of the
    Member's assets, to the extent such liquidation would not
    itself cause an immediate and heavy financial need, (iii) by
    cessation of Member 401(k) deferrals pursuant to Article III,
    Section 4 of the Plan or Member Regular contributions
    pursuant to Article III, Section 1 of the Plan or (iv) by
    other distributions or nontaxable (at the time of the loan)
    loans from plans maintained by the Employer or by any other
    employer, or by borrowing from commercial sources on
    reasonable commercial terms.  The amount of any withdrawal
    pursuant to this Paragraph (H) shall not exceed the amount
    required to meet the demonstrated financial hardship,
    including any amounts necessary to pay any federal income
    taxes and penalties reasonably anticipated to result from the
    distribution, as certified to the Plan by the Member.

    No amounts may be withdrawn on account of hardship pursuant
    to this Paragraph prior to a Member's withdrawal of the
    remaining vested balance of his Regular Account and Rollover
    Account, notwithstanding the withdrawal restrictions
    contained in Article VII, Section 2 or below.

    Only one in-service withdrawal under this Paragraph may be
    made in any Plan Year, and any amounts paid under this
    Article may not be returned to the Plan.  The amount of a
    withdrawal under this Paragraph (H) must be not less than the
    lesser of (i) $1,000, (ii) the full value of the vested
    portion of the 401(k) Account (reduced by the amount of
    post-December 31, 1988 earnings and Employer 401(k)
    contributions for those Members who have not attained age
    59 1/2), if such value is less than $1,000, or (iii) the amount
    approved as a hardship withdrawal by the Board.

(I) Notwithstanding any other provision of the Plan, no Member
    may defer to his 401(k) Account during any Plan Year an
    amount in excess of $7,000 multiplied by the adjustment
    factor as provided by the Secretary of the Treasury.  The
    adjustment factor shall mean the cost of living adjustment
    factor prescribed by the Secretary of the Treasury under
    Section 402(g)(5) of the Code for years beginning after
    December 31, 1987, as applied to such items and in such
    manner as the Secretary shall provide.  In the event that the
    aggregate amount of 401(k) deferrals for a Member exceeds the
    limitation in the previous sentence, the amount of such
    excess, increased by any income and decreased by any losses

                                       -22-
<PAGE>

    attributable thereto, shall be refunded to such Member no
    later than the April 15 of the Plan Year following the Plan
    Year for which the 401(k) deferrals were made.

Section 5.  Remittance of Contributions.

The monthly contributions of both Members and their Employer (including an
administrative fee, as determined by the Board, to be paid by the Employer to
defray expenses attributable to its participation in the Plan) shall be
recorded by the Employer and remitted to the Board so that the Board shall be
in receipt thereof by the 15th day of the month next following the month in
respect of which such contributions are payable.  Such amounts shall be used
to provide additional Units pursuant to Article V.  Any contributions received
by the Thrift Plan Office on the first working day of a month shall be deemed
to have been received on the last working day of the immediately preceding
month.  Working day shall be defined as any day regular mail is delivered by
the United States Postal Service.

Section 6.  Transfer of Funds and Rollover Contributions.

(A) Upon such terms and conditions as the Board and the IRS shall
    approve, and provided that all benefits (including all
    optional forms of benefit) under the prior retirement plan
    are protected in accordance with Section 411(d)(6) of the
    Code, or any successor thereto, and the IRS Regulations
    thereunder, a transfer of funds may be made to the Plan from
    a prior retirement plan of an employer which was qualified
    under Section 401(a) of the Code so long as such funds (a)
    have been allocated to the individual members of such prior
    plan, (b) shall be allocated to the Accounts of the Members
    of the Plan to whom they were allocated under such prior
    plan, and (c) shall be applied so that each Member affected
    thereby would receive a benefit immediately after the
    transfer, if the Plan then terminated, at least equal to the
    benefit he would have received upon a termination of such
    prior plan immediately before such transfer.  In addition to
    protecting those prior retirement plan benefits as required
    in the preceding sentence, the Thrift Plan Office may, in its
    discretion, preserve any other prior retirement plan options
    which it determines to be economically and administratively
    feasible and which are not required to be protected under
    Section 411(d)(6) of the Code.  Each Employee with respect to
    whom such a transfer is made shall, upon such transfer, be
    eligible for membership in the Plan.

    (B) If the funds so transferred are transferred from a retirement
    plan subject to Code Section 401(a)(11), then such funds
    shall be maintained in a separate account and any subsequent
    distribution of those funds, and earnings thereon, shall be
    subject to the following provisions:

    (1)  The benefit to which a married Member is entitled shall,
         except as otherwise provided in this Paragraph (B), be

                                       -23-
<PAGE>

         payable by purchase from an insurance company
         of a single premium contract providing for a Qualified
         Joint and Survivor Annuity.  The term, "Qualified Joint
         and Survivor Annuity," means a benefit providing an
         annuity commencing immediately for the life of the
         Member, ending with the payment due on the last day of
         the month coincident with or preceding the date of his
         death, and, if the Member dies leaving a Surviving
         Spouse, a survivor annuity for the life of such
         Surviving Spouse equal to one-half of the annuity
         payable for the life of the Member under his Qualified
         Joint and Survivor Annuity, commencing on the last day
         of the month following the date of the Member's death
         and ending with the payment due on the first day of the
         month coincident with or preceding the date of such
         Surviving Spouse's death.

    (2)  In lieu of the form of benefit described immediately
         above, any benefit payable pursuant to this Paragraph
         (B) may be paid in one cash payment thereof, subject to
         the provisions of Subparagraph (5) below.

    (3)  If a Member dies prior to the date payment of his
         benefit commences (i) without leaving a Surviving
         Spouse, or (ii) leaving a Surviving Spouse and having
         made a valid election to waive the Preretirement
         Survivor Annuity in accordance with Subparagraph (5)
         below, then the remaining value of the Member's account
         subject to this Paragraph (B) shall become payable to
         his Beneficiary in a lump sum subject to Article III,
         Section 8(E)(2) and Article VII, Section 3(B).

    (4)  A Preretirement Survivor Annuity shall be paid to the
         Surviving Spouse of a Member or former Member who dies
         before the commencement of payment of any benefit from
         an account subject to this Paragraph (B).  The term
         "Preretirement Survivor Annuity" means a benefit
         providing for payment of 50% of the Member's account
         balance as of the Valuation Date coincident with or
         preceding the date of his death, by the purchase of a
         single premium contract issued by an insurance company
         providing a survivor annuity to his Surviving Spouse,
         for the life of such Surviving Spouse.  Payment of a
         Preretirement Survivor Annuity shall commence in the
         month following the month in which the Member dies or
         as soon as practicable thereafter; provided, however,
         that to the extent required by law, if the value of the
         amount used to purchase a Preretirement Survivor
         Annuity exceeds $3,500, then payment of the
         Preretirement Survivor Annuity shall not commence prior
         to the date the Member reached (or would have reached,
         had he lived) Normal Retirement Age without the written
         consent of the Member's Surviving Spouse.  Absence of
         any required consent will result in a deferral of
         payment of the Preretirement Survivor Annuity to the
         month following the month in which

                                       -24-
<PAGE>

         occurs the earlier of (i) the date the required consent is
         received by the Board or (ii) the date the Member would have
         reached Normal Retirement Age had he lived.

(5) (i)    In the case of the Qualified Joint and Survivor
           Annuity, the Fund shall no less than 30 days and no
           more than 90 days prior to the annuity starting
           date provide each Member a written explanation of:
           (i) the terms and conditions of the Qualified Joint
           and Survivor Annuity; (ii) the Member's right to
           make and the effect of an election to waive the
           Qualified Joint and Survivor Annuity form of
           benefit; (iii) the rights of a Member's Spouse; and
           (iv) the right to make, and the effect of, a
           revocation of a previous election to waive the
           Qualified Joint and Survivor Annuity.  In the case
           of the Preretirement Survivor Annuity, the Fund
           shall provide each Member within the applicable
           period for such Member a written explanation of the
           Preretirement Survivor Annuity in such terms and in
           such manner as would be comparable to the
           explanation provided for meeting the requirements
           applicable to the Qualified Joint and Survivor
           Annuity.

           The applicable period for a Member is whichever of
           the following periods ends last:  (i) the period
           beginning with the first day of the Plan Year in
           which the Member attains age 32 and ending with the
           close of the Plan Year preceding the Plan Year in
           which the Member attains age 35; (ii) a reasonable
           period ending after the individual becomes a
           Member; or (iii) a reasonable period ending after
           this subparagraph (i) first applies to the Member.
           Notwithstanding the foregoing, notice must be
           provided within a reasonable period ending after
           separation from service in the case of a Member who
           separated from service before attaining age 35.

           For purposes of applying the preceding paragraph, a
           reasonable period ending after the enumerated
           events described in (ii) and (iii) is the end of
           the two-year period beginning one year prior to the
           date the applicable event occurs, and ending one
           year after that date.  In the case of a Member who
           separates from service before the Plan Year in
           which age 35 is attained, notice shall be provided
           within the two-year period beginning one year prior
           to separation and ending one year after separation.
           If such a Member thereafter returns to employment
           with an Employer, the applicable period for such
           Member shall be redetermined.

     (ii)  A Member may, with the written consent of his Spouse
           (unless the Board makes a written determination in

                                       -25-
<PAGE>

              accordance with the Code and the Regulations that
              no such consent is required), elect in writing (i)
              to receive his benefit in a single lump sum payment
              within the 90-day period ending on his annuity
              starting date (which is the first day of the first
              period for which an amount is paid as an annuity
              or any other form); and (ii) to waive the
              Preretirement Survivor Annuity within the period
              beginning on the first day of the Plan Year in
              which the Member attains age 35 and ending on the
              date of his death.  Any election made pursuant to
              this Subparagraph (5) may be revoked by a Member,
              without spousal consent at any time within which
              such election could have been made.  Such an
              election or revocation must be made in accordance
              with procedures developed by the Board and shall
              be notarized.

              Any consent by a Spouse obtained under this
              provision (or establishment that the consent of a
              Spouse may not be obtained) shall be effective only
              with respect to such Spouse.  A consent that
              permits designations by the Member without any
              requirement of further consent by such Spouse must
              acknowledge that the Spouse has the right to limit
              consent to a specific Beneficiary, and a specific
              form of benefit where applicable, and that the
              Spouse voluntarily elects to relinquish either or
              both of such rights.  No consent obtained under
              this provision shall be valid unless the Member has
              received the notice described in subparagraph (i)
              above.

(6)  Notwithstanding the preceding provisions of this
     Paragraph (B), any benefit of $3,500, subject to the
     limits of Article X, Section 4, or less shall be paid
     in a lump cash sum in full settlement of the Plan's
     liability therefor; provided, however, that in the case
     of a married Member, no such lump sum payment shall be
     made after benefits have commenced without the consent
     of the Member and his Spouse or, if the Member has
     died, the Member's Surviving Spouse.  Furthermore, if
     the value of the benefit payable to a Member or his
     Surviving Spouse is greater than $3,500 and the Member
     has or had not reached his Normal Retirement Age, then
     to the extent required by law, unless the Member (and,
     if the Member is married and his benefit is to be paid
     in a form other than a Qualified Joint and Survivor
     Annuity, his Spouse, or, if the Member was married, his
     Surviving Spouse) consents in writing to an immediate
     distribution of such benefit, his benefit shall
     continue to be held in the Trust until a date following
     the earlier of (i) the date of the Board's receipt of
     all required consents or (ii) the date the Member
     reaches his earliest possible Normal Retirement Age
     under the Plan (or would have reached such date had he
     lived), and thereafter shall be paid in accordance with
     this Paragraph (B).
                                       -26-
<PAGE>

    (C) Upon such terms and conditions as the Board shall approve,
    effective January 1, 1993, (i) all Members (regardless of
    whether their Accounts are active) shall be permitted to make
    rollover contributions to the Plan of amounts held on their
    behalf in an employee benefit plan qualified under Section
    401(a) of the Code or an individual retirement account or
    annuity described in Section 408(d)(3) of the Code and (ii)
    an Employer may, at its option, permit its Employees to make
    rollover contributions prior to the date as of which the
    Employees become eligible for membership in the Plan.  All
    such amounts which are accepted by the Thrift Plan Office
    shall be certified in form and substance satisfactory to the
    Thrift Plan Office by the Member as consisting of all or a
    portion of (i) a "qualified total distribution" within the
    meaning of Section 402(a)(5)(E)(i) of the Code or (ii)
    effective January 1, 1993, an "eligible rollover
    distribution" or a "rollover contribution" within the meaning
    of Section 402(c)(4) or Section 408(d)(3), respectively, of
    the Code.  A Member shall have a nonforfeitable vested
    interest in all such amounts credited to his Rollover Account

Section 7.  Limitations on Member Contributions and Matching
              Employer Contributions.

(A) Notwithstanding any other provision of this Section 7, the
    actual contribution percentage for the Plan Year for Highly
    Compensated Employees shall not exceed the greater of the
    following actual contribution percentages:  (a) the actual
    contribution percentage for such Plan Year of those Employees
    who are not Highly Compensated Employees multiplied by 1.25;
    or (b) the actual contribution percentage for the Plan Year
    of those Employees who are not Highly Compensated Employees
    multiplied by 2.0, provided that the actual contribution
    percentage for the Highly Compensated Employees does not
    exceed the "actual contribution percentage" for such other
    Employees by more than 2 percentage points.  For purposes of
    this Section 7, the "actual contribution percentage" for a
    Plan Year means, for each specified group of Employees, the
    average of the ratios (calculated separately for each
    Employee in such group) of (a) the sum of (i) Employer
    matching contributions credited to his Regular Account as
    described in Section 2 and Section 3, Formula (1) of this
    Article for the Plan Year, (ii) Member contributions credited
    to his Regular Account for the Plan Year, and (iii) in
    accordance with and to the extent permitted by the IRS
    Regulations, 401(k) deferrals credited to his 401(k) Account,
    to (b) the amount of the Member's compensation (as defined in
    Section 414(s) of the Code) which, at the Employer's
    election, shall include the compensation required to be
    reported under Section 6041 or 6051 of the Code (i.e., "W-2
    compensation") for the Plan Year or, alternatively, where
    specifically elected by the Employer, for only that part of
    the Plan Year during which the Member was eligible to
    participate in the Plan.  The 401(k) deferrals referred to in
    (iii) above in this Paragraph (A) may be taken

                                       -27-
<PAGE>

    into account in determining the actual contribution percentage
    for a Plan Year if the actual deferral percentage test is satisfied
    prior to and following the exclusion of the 401(k) deferrals
    that are used to satisfy the actual contribution percentage
    test.  An Employee's actual contribution percentage shall be
    zero if no such contributions are made on his behalf for such
    Plan Year.  The actual contribution percentage taken into
    account under this Paragraph (A) for any Highly Compensated
    Employee who is eligible to make Member contributions or
    receive Employer matching contributions under two or more
    plans described in Section 401(a) of the Code or arrangements
    described in Section 401(k) of the Code that are maintained
    by the Employer shall be determined as if all such
    contributions were made under a single plan.  For purposes of
    determining the actual contribution percentage of a Member
    who is a Highly Compensated Employee subject to the family
    aggregation rules of Section 414(q)(6) of the Code because
    such Member is either a five-percent owner or one of the ten
    most Highly Compensated Employees as described in Section
    414(q)(6) of the Code, the Employer matching and Member
    contributions and compensation (as defined in Section 414(s)
    of the Code) of such Member shall include the Employer
    matching and Member contributions and compensation (as
    defined in Section 414(s) of the Code) of "family members",
    within the meaning of Section 414(q)(6) of the Code, and such
    "family members" shall not be considered as separate
    Employees in determining actual contribution percentages.

    (B) The Thrift Plan Office shall determine as of the end of the
    Plan Year whether one of the actual contribution percentage
    tests specified in Paragraph (A) above is satisfied for such
    Plan Year.  This determination shall be made after first
    determining the treatment of excess deferrals within the
    meaning of Section 402(g) of the Code under Article III,
    Section 4(I) and then determining the treatment of excess
    contributions under Article III, Section 4(E).  In the event
    that neither of the actual contribution percentage tests is
    satisfied, the Thrift Plan Office shall refund the excess
    aggregate contributions in the manner described in Paragraph
    (C) below.  For purposes of this Section 7, "excess aggregate
    contributions" means, with respect to any Plan Year and with
    respect to any Member, the excess of the aggregate amount of
    contributions (and any earnings and losses allocable thereto)
    made as (a) Employer matching contributions to their Regular
    Accounts, (b) Member contributions to their Regular Accounts
    and (c) 401(k) deferrals by Members to their 401(k) Accounts
    (to the extent permitted by the IRS Regulations and if the
    Thrift Plan Office elects to take into account such 401(k)
    contributions when calculating the actual contribution
    percentage) of Highly Compensated Members for such Plan Year,
    over the maximum amount of such contributions that could be
    made as Employer matching contributions to Regular Accounts,
    Member contributions to Regular Accounts and 401(k)

                                       -28-
<PAGE>

    deferrals by Members to 401(k) Accounts of such Members without
    violating the requirements of Paragraph (A) above.

(C) If the Thrift Plan Office is required to refund excess
    aggregate contributions for any Highly Compensated Member for
    a Plan Year in order to satisfy the requirements of Paragraph
    (A) above, then the refund of such excess aggregate
    contributions shall be made with respect to such Highly
    Compensated Members to the extent practicable before the 15th
    day of the third month immediately following the Plan Year
    for which such excess aggregate contributions were made, but
    in no event later than the end of the Plan Year following
    such Plan Year or, in the case of the termination of the Plan
    in accordance with Article XII or termination of Employer
    participation in the Plan in accordance with Article XI, no
    later than the end of the twelve-month period immediately
    following the date of such termination.  For each such
    Member, the amounts so refunded shall be made in the
    following order of priority:  (i) to the extent that the
    amounts contributed by the Member to his Regular Account for
    such Plan Year exceed the highest rate of such contributions
    with respect to which amounts were contributed by the
    Employer to the Member's Regular Account, by refunding such
    amounts contributed by the Member to his Regular Account
    which were not matched by his Employer (and any earnings and
    losses allocable thereto) and (ii) by refunding amounts
    contributed for such Plan Year by the Member to his Regular
    Account which were matched by his Employer (and any earnings
    and losses allocable thereto) and, solely to the extent
    permitted under the Code and applicable IRS Regulations,
    distributing to the Member amounts contributed for such Plan
    Year by the Employer with respect to the amounts so returned
    (and any earnings and losses allocable thereto).  All such
    distributions shall be made to, or shall be with respect to,
    Highly Compensated Members on the basis of the respective
    portions of such amounts attributable to each such Highly
    Compensated Member.

Section 8.  Profit Sharing Feature.

    (A) An Employer may, at its option, adopt a Profit Sharing
    Feature as described herein, subject to any other provisions
    of the Plan, where applicable.  This Feature may be adopted
    either in lieu of, or in addition to, any other Plan Feature
    contained in this Article III, including the contributions
    described in Sections 1 through 4 of this Article.  The
    Profit Sharing Feature is designed to provide the Employer a
    means by which to provide discretionary contributions on
    behalf of Employees eligible under the Plan.

    Where investments provided for the contributions permitted under
    Article III, Sections 1 through 4 were subject to the Members'
    investment directions among the Investment Funds and the Profit
    Sharing Feature elected by the Employer requires that all account
    balances be invested in Investment Fund B or D, the accounts

                                       -29-
<PAGE>

    provided under Article III, Sections 1 through 4 will continue
    to be subject to the Members' directions, pursuant to the provisions
    of Article IV.

(B) (1)  Subject to the provisions of Article X, Section 1, an
         Employer may, but shall not be required to, contribute
         on behalf of each of its Members, on an annual (or at
         the election of the Employer, quarterly) basis for any
         Plan Year or fiscal year of the Employer (as the
         Employer shall elect), a discretionary amount not to
         exceed the maximum amount allowable as a deduction to
         the Employer under the provisions of Section 404 of the
         Code.  Such Profit Sharing contribution must be
         received by the Thrift Plan Office on or before the
         last business day of the second month following the
         close of the Contribution Determination Period on
         behalf of all those Members who were in its employ on
         the last working day of such Contribution Determination
         Period.  For purposes of making the al locations
         described in this Subparagraph (B)(1), a Member who is
         on a Type 1 non-military Leave of Absence (as defined
         in Article I, Paragraph (20) and Article X, Section
         8(B)(1)) or a Type 4 military Leave of Absence (as
         defined in Article I, Paragraph (20) and Article X,
         Section 8(B)(4)), shall, notwithstanding the provisions
         of this Paragraph, be treated as if he were a Member
         who was an Employee in Employment on the last day of
         such Contribution Determination Period.

    (2)  A Profit Sharing Account shall be established and
         maintained on behalf of each Member whose Employer has
         adopted the Profit Sharing Feature showing each
         Member's interests in the Investment Funds attributable
         solely to such Profit Sharing contributions.  The
         interest in each Investment Fund shall be represented
         by Units.  These Units will be valued in accordance
         with Article V.  Such account shall be known as the
         "Profit Sharing Account," as defined under Article I,
         Paragraph (27) and shall be an account segregated from
         all other accounts maintained under the Plan with
         respect to such Member.

(C) (1)  Contributions shall be allocated to each Member's Profit
         Sharing Account for the Contribution Determination
         Period at the election of the Employer, in accordance with one of
         the options selected below: (i) in the same ratio as each
         Member's Salary during such Contribution Determination
         Period bears to the total of such Salary of all Members,
         (ii) in the same ratio as each Member's Salary for the
         portion of the Contribution Determination Period during
         which the Member satisfied the Employer's eligibility
         requirement(s) bears to the total of such Salary of all
         Members or (iii) an Employer may integrate the Profit
         Sharing Feature with Social Security in accordance with the

                                       -30-
<PAGE>

         following provision.  The annual (or quarterly, if
         applicable) contribution for any Contribution
         Determination Period (which period shall include, for
         the purposes of the following maximum integration
         levels provided under Subparagraphs (C)(1) and (2) for
         those Employers who have elected quarterly allocations
         of contributions, the four quarters of a Plan Year or
         fiscal year) shall be allocated to each Member who is
         employed by the Employer on the last day of such
         Contribution Determination Period in a uniform
         percentage (i) of each Member's Salary during the
         Contribution Determination Period up to the Social
         Security Taxable Wage Base for such Contribution
         Determination Period (the "Base Contribution
         Percentage"), plus a uniform percentage of each
         Member's Salary for the Contribution Determination
         Period in excess of the Social Security Taxable Wage
         Base for such Contribution Determination Period (the
         "Excess Contribution Percentage"), or (ii) of each
         Member's Salary for the portion of the Contribution
         Determination Period during which the Member satisfied
         the Employer's eligibility requirement(s), if any, up
         to the Base Contribution Percentage for such
         Contribution Determination Period, plus a uniform
         percentage of each Member's Salary for the portion of
         the Contribution Determination Period during which the
         Member satisfied the Employer's eligibility
         requirement(s), equal to the Excess Contribution
         Percentage.

    (2)  The Excess Contribution Percentage described in
         Subparagraph (1) above may not exceed the lesser of (i)
         the Base Contribution Percentage, or (ii) the greater
         of (1) 5.7% or (2) the percentage equal to the portion
         of the Code Section 3111(a) tax imposed on employers
         under the Federal Insurance Contributions Act (as in
         effect as of the beginning of the Plan Year) which is
         attributable to old-age insurance.  For purposes of
         this Subparagraph (2), "compensation" as defined in
         Section 414(s) of the Code shall be substituted for
         "Salary" in determining the Excess Contribution
         Percentage and the Base Contribution Percentage.

    (3)  The Employer may not adopt the Social Security
         integration options provided above if any other
         integrated defined contribution or defined benefit plan
         is maintained by the Employer during any Contribution
         Determination Period.

    (4)  No contributions by Members shall be made under the
         Profit Sharing Feature provided under this Section 8 of
         Article III.

(D) (1)  Contributions under the Profit Sharing Feature shall be
         invested in accordance with the provisions and procedures
         of Article IV, except as otherwise provided in this

                                       -31-
<PAGE>

         Paragraph (D).  At the Employer's election,
         contributions on behalf of Members may be invested (i)
         entirely in Investment Fund B or D, or (ii) pursuant to
         the Member's directions among the Investment Funds.  If
         the Employer does not so elect, or until an effective
         direction is made by Members, all contributions made
         pursuant to this Article III, Section 8, shall be
         invested in Investment Fund D.

    (2)  A Member's investment directions, if any, with respect
         to contributions made under the Profit Sharing Feature,
         shall be submitted in writing and shall be separate
         from the directions submitted with respect to all other
         contributions under the Plan.

    (3)  Where an Employer previously elected to invest
         contributions pursuant to Article IV and subsequently
         elects to have all future contributions invested
         entirely in Investment Fund B or D in accordance with
         Subparagraph (D)(1) above, Units previously accumulated
         in the Investment Funds prior to such election will
         continue to be subject to the Members' investment
         directions among such Investment Funds in accordance
         with Article IV.  All future Employer contribution
         allocations made following the Employer's election
         shall be allocated to Investment Fund B or D,
         respectively.

(E) (1)  Except as otherwise provided under Article VII, Section
         2, no amounts may be withdrawn from a Member's Profit
         Sharing Account while still employed by the Employer,
         other than (i) amounts required to be distributed no
         later than April 1 of the calendar year following the
         calendar year in which the Member attains age 70 1/2, in
         accordance with Article VII, Section 3(C); (ii) amounts
         required to be distributed pursuant to the terms of a
         Qualified Domestic Relations Order, as defined in
         Article X, Section 6 of the Plan; or (iii) amounts
         withdrawn on account of mistake of fact, within one
         year after the payment of the contribution, as reviewed
         and approved by the Thrift Plan Office.

    (2)  Subject to the provisions of Article VII, Section 3 of
         the Plan, upon receipt by the Plan of a notice of
         termination of Employment, a Member may request to
         withdraw any or all vested Units in his Profit Sharing
         Account, including any Units held in a Rollover Account
         for such Member, following the filing of a notice of
         withdrawal with the Thrift Plan Office.  Subject to the
         provisions of Article VII, Section 3 and, to the extent
         applicable, the provisions of Article III, Section 6(B)
         (relating to transferred amounts and spousal consent),
         the normal form of benefit payment under the Profit
         Sharing Account upon receipt by the Plan of a notice of
         withdrawal is a lump sum payment.  In lieu of a lump
         sum payment upon termination, to the extent

                                       -32-
<PAGE>

         permissible under Article VII, Section 3(B)(2), and, to the extent
         applicable, the provisions of Article III, Section 6(B)
         (relating to transferred amounts and spousal consent),
         a Member may elect in his notice of withdrawal to (i)
         defer receipt of some or all of his vested Profit
         Sharing Account until April 1 of the calendar year
         following the calendar year in which the Member attains
         70 1/2 in accordance with Article VII, Section 3(C); (ii)
         elect installment payments, as described below; (iii)
         if the Member's Employer has adopted the Plan after
         June 30, 1992 and has elected the annuity option under
         Section 3(B)(2) of Article VII, or to the extent
         otherwise required under Article III, Section 6(B)
         (relating to transferred amounts and spousal consent),
         receive an annuity, subject to the provisions of
         Section 3(B)(2) of Article VII (including spousal
         consent rules); or (iv) make periodic withdrawals not
         more frequently than once per year pursuant to the
         provisions of Article VII, Section 2.  Notwithstanding
         the provisions of Article VII, Section 3 (other than
         Subsection (B)(2) thereof), any terminated Member with
         a Profit Sharing Account balance equal to or greater
         than $3,500 may elect to be paid in up to 10 annual
         installments (or, effective January 1, 1993, in 15 or
         20 annual installments, provided that a Member shall
         not be permitted to elect an installment period in
         excess of his remaining life expectancy and if a Member
         attempts such an election, he shall be deemed to have
         elected the installment period with the next lowest
         multiple within the Member's remaining life
         expectancy).  The election of installments under this
         Subparagraph (2) may not be subsequently changed by the
         Member, except that the Member may request, in a notice
         of withdrawal, to withdraw the balance of the Units in
         his Profit Sharing Account as of the last day of any
         month.

    (3)  Payments made on account of a Member's death shall be
         governed by the provisions contained in Article VII,
         Section 5.

    (4)  Notwithstanding the provisions of this Article III,
         Section 8, and subject to the provisions of Article
         VII, Section 3(C), any benefit payable to a Member
         shall commence no later than April 1 of the calendar
         year following the calendar year in which such Member
         attains age 70 1/2.

    (5)  Where an Employer decides to no longer make available the
         Profit Sharing Feature, as described in Article III,
         Section 8, and adopts one of the options contained in
         Article III, Sections 1 through 4 in lieu thereof, the
         investment direction rights of Members with respect to
         their Profit Sharing Accounts shall be in accordance with
         the investment direction provisions of the Plan in effect
         immediately prior to such Employer decision (in accordance

                                       -33-
<PAGE>

         with Article III, Section 8(D)), unless otherwise specified
         by the Employer.

    (6)  A transfer of funds may be made to the Profit Sharing
         Feature from a prior retirement plan which was
         qualified under Section 401(a) of the Code, subject to
         the provisions of Article III, Sections 6(A) and (B)
         and such additional terms and conditions as the Board
         shall approve.  If the funds so transferred are from a
         retirement plan which maintains employee contributions,
         such transfer will not become effective until the
         Employer either (i) returns such employee contributions
         to the affected members prior to the transfer, or (ii)
         maintains the prior trust to hold such employee
         contributions until such time as they are fully
         distributed.

    (7)  Subject to the provisions of Article XI, an Employer
         may terminate its participation in the Profit Sharing
         Feature.  Distributions shall be made in accordance
         with the provisions of Article VII, Section 3.

                                       -34-
<PAGE>

                  ARTICLE IV INVESTMENT OF CONTRIBUTIONS

All contributions to the Plan shall, upon receipt by the Board, be delivered
to the Trustee to be held in the Trust Fund and invested and distributed by
the Trustee in accordance with the provisions of the Plan and Trust Agreement.
The Trust Fund shall consist of certain investment funds (each an "Investment
Fund") as described in the Trust Agreements and designated as follows:

    "Investment Fund A" - A diversified equity portfolio with the
    objective of simulating the performance of the Standard &
    Poor's Composite Index of 500 stocks.

    "Investment Fund B" - An income portfolio with the objective
    of maximizing income at minimum risk of capital with
    contributions invested in fixed income instruments,
    including, but not limited to:  (i) group annuity contracts
    including fixed and variable rate contracts with insurance
    companies or other financial institutions, (ii) bank time
    deposits or deposit agreements, (iii) short term investment
    funds, (iv) U.S. Treasury Bills and (v) third party
    agreements providing book value liquidity for investments in
    U.S. Government or Agency securities or collateralized
    mortgage obligations backed by Agency collateral.

    "Investment Fund C" - A diversified equity portfolio with the
    objective of simulating the performance of the Standard &
    Poor's MidCap Index of 400 stocks.

    "Investment Fund D" - A government instrument fund with the
    objective of maximizing income at minimum risk of capital
    with underlying investments in obligations issued or
    guaranteed by the United States government or agencies or
    instrumentalities thereof.

    "Investment Fund E" - A diversified debt portfolio with the
    objective of simulating the performance of Lehman Brothers
    Aggregate Bond Index.

A Trustee may in its discretion invest any amounts held by it in any
Investment Fund in any commingled or group trust fund described in Section
401(a) of the Code and exempt under Section 501(a) of the Code or in any
common trust fund exempt under Section 584 of the Code, provided that such
trust fund satisfies the requirements of this Plan applicable to such
investment fund and that the Trustees serve as Trustee of such commingled,
group or common trust fund.  To the extent that the Investment Funds are at
any time invested in any commingled, group or common trust fund, the
declaration of trust or other instrument pertaining to such fund and any
amendments thereto are hereby adopted as part of this Agreement and deemed to
form a part of the Plan.

                                       -35-
<PAGE>

Except as provided in Article III, Section 8(D)(1), each Member shall direct
in writing that his contributions (including 401(k) deferrals and rollover
contributions, if any) and the contributions made by his Employer (including
Profit Sharing contributions) on his behalf shall be invested (a) entirely in
any single Investment Fund or (b) in any combination of Investment Funds in
multiples of 5%.  Until an effective direction is made by the Member, all such
contributions shall be invested in Investment Fund D.

Any such investment direction shall be followed until changed.  Subject to the
provisions of the following paragraphs of this Section, one time during each
month a Member may change his investment direction as to future contributions
and also as to the value of his accumulated Units in the Investment Funds by
filing written notice with the Thrift Plan Office.  Such directed change will
become effective upon the Valuation Date coinciding with or next following the
date which his notice was received by the Thrift Plan Office subject to the
same conditions with respect to the amount to be transferred under this
Section which are specified in the Plan procedures for determining the amount
of payments made under Article VII, Section 1(A) of the Plan.

Except as otherwise provided below, a Member may not direct a transfer of his
accumulated units in Investment Fund B to Investment Fund D and/or E.  A
Member may direct a transfer from Investment Funds A and/or C to Investment
Fund D and/or E provided that, except as otherwise provided below, amounts
previously transferred from Investment Fund B following April 1, 1991, to
Investment Funds A or C remain in such equity funds for a period of three
months prior to being transferred to Investment Fund D or E.

Notwithstanding the above, a Member may direct a transfer from Investment Fund
B to Investment Fund D in multiples of 5% as of April 30, 1991 by filing an
irrevocable written notice on a form supplied by the Thrift Plan Office with
the Thrift Plan Office on or before March 15, 1991.  Notwithstanding any other
provision in the Plan to the contrary, amounts transferred or contributed to
Investment Fund B may not be distributed, borrowed or otherwise withdrawn by
the Member prior to July 1, 1991, unless the Member terminates Employment.  In
the event that the aggregate amount which Members have directed to be
transferred from Investment Fund B to Investment Fund D exceeds the amount the
Board determines to be available for such transfers under the provisions of
the investment contracts through which the assets of Investment Fund B are
invested, the Board shall limit, to such extent as it may deem appropriate and
in a uniform and nondiscriminatory manner, the amount that any Member may so
transfer based on a proportion of the amount requested to be transferred over
the amount available to be transferred.

To the extent that the amount which a Member directs to be transferred from
Investment Fund B to Investment Fund D exceeds the amount that the Board has
determined he may transfer, he may irrevocably elect,

                                       -36-
<PAGE>

 not later than March 15, 1991, in accordance with the form supplied by the
Thrift Plan Office, to transfer such excess amounts (i) from Investment Fund B
to Investment Funds A and/or C as of April 30, 1991 and (ii) from Investment
Funds A and/or C to Investment Fund D as of the next following Valuation Date.
If the Member does not elect to transfer such excess amounts to the equity
funds, as of April 30, 1991, such excess amounts shall remain in Investment
Fund B and otherwise be held in accordance with the provisions of the Plan.

                                       -37-
<PAGE>

             ARTICLE V  MEMBERS' ACCOUNTS, UNITS AND VALUATION

An Account shall be established and maintained for each Member showing his
interests in the Investment Funds.  The interest in each Investment Fund shall
be represented by Units.  Separate subaccounts shall be established and
maintained for each Member, as applicable, under (i) Article III, Section
8(B)(2) (Profit Sharing Account), (ii) Article III, Section 4 (401(k)
Account), (iii) Article III, Section 2(C) (Regular Account).  In addition, a
separate Rollover Account shall be established and maintained for each Member
or Employee who elects a rollover under Article III, Section 6(C).

As of each Valuation Date, the value of a Unit in each Investment Fund shall
be determined by dividing (a) the sum of the net assets at market value
determined by the Trustee by (b) the total number of outstanding Units.

The number of additional Units to be credited to a Member's interest in each
Investment Fund, as of any Valuation Date, shall be determined by dividing (a)
that portion of the aggregate contributions by and on behalf of the Member
which was directed to be invested in such Investment Fund and received by the
Board during the month in which such Valuation Date occurs by (b) the Unit
value of such Investment Fund as of the next Valuation Date.  For purposes of
the preceding sentence, in valuing a Member's Account, contributions of both
Members and their Employer which have been reported and received by the Thrift
Plan Office on the first working day (as defined in Article III, Section 5) of
a month shall be deemed to have been received on the last working day of the
immediately preceding month.  Working day shall be defined as any day regular
mail is delivered by the United States Postal Service.

The value of a Member's Account may be determined as of any Valuation Date by
multiplying the number of Units to his credit in each Investment Fund by the
value of the Investment Fund Unit on such date and aggregating the results.

                                       -38-
<PAGE>

                        ARTICLE VI VESTING OF UNITS

Section 1.  Vesting.

(A) All Units credited to a Member's Account shall immediately
    and fully vest in him, except (i) Units credited to a
    Member's Profit Sharing Account which shall vest in
    accordance with the schedule adopted by his Employer under
    this Article and (ii) Units attributable to contributions
    made by the Employer after June 30 1992 under Section 2 or
    Section 3 of Article III, with respect to which the Employer
    has elected to adopt a vesting schedule as provided in this
    Article, which Units shall vest in accordance with such
    schedule.

(B) An Employer may adopt a different vesting schedule for its
    Members' (i) Profit Sharing Accounts, (ii) Matching Amounts
    and (iii) Basic Amounts and Supplemental Amounts.

(C) In accordance with Subsection (A) above, one or more of the
    following schedules may be elected by the Employer:

    Schedule 1:    Applicable Units shall immediately and fully
                   vest.  If the eligibility requirement(s)
                   selected by the Employer under Article II,
                   Section 2(B), require(s) that an Employee
                   complete a period of Employment which is
                   longer than 12 consecutive months, this
                   vesting Schedule 1 shall be automatically
                   applicable.

    Schedule 2:    Applicable Units shall become nonforfeitable
                   and fully vested in accordance with the
                   schedule set forth below:

                   Completed                      Vested
                   Years of Employment              Percentage
                   -------------------              ----------
                     Less than 2                      0%
                     2 but less than 3               20%
                     3 but less than 4               40%
                     4 but less than 5               60%
                     5 but less than 6               80%
                     6 or more                      100%

                                       -39-
<PAGE>

                   Schedule 3:  Applicable Units shall become nonforfeitable
                   and fully vested in accordance with the
                   schedule set forth below:

                        Completed                    Vested
                   Years of Employment             Percentage
                   -------------------             ----------
                   Less than 5                        0%
                   5 or more                        100%

                   Schedule 4:  Applicable Units shall become nonforfeitable
                   and fully vested in accordance with the schedule set
                   forth below:

                        Completed                    Vested
                   Years of Employment             Percentage
                   -------------------             ----------
                   Less than 3                        0%
                   3 or more                        100%

                   Schedule 5:  Applicable Units shall become nonforfeitable
                   and fully vested in accordance with the schedule set
                   forth below:

                        Completed                    Vested
                   Years of Employment             Percentage
                   -------------------             ----------
                   Less than 1                        0%
                   1 but less than 2                 25%
                   2 but less than 3                 50%
                   3 but less than 4                 75%
                   4 or more                        100%


      Notwithstanding the vesting schedules above, a Member's
      interest in his Account shall become 100% vested in the event
      that (i) the Member dies while in active Employment and the
      Plan has received notification of death, (ii) the Member has
      been approved for Disability, pursuant to the provisions of
      Article VII, Section 4, and the Plan has received
      notification of Disability, or (iii) the Member has attained
      Normal Retirement Age.

(D)   Vesting Election

      (1)  Except as otherwise provided in the next following
           paragraph, in the event that the Employer adopts the Plan
           as a successor plan to another defined contribution plan
           qualified under Section 401(a) and 501(a) of the Code, or
           in the event that the Employer changes or amends a vesting
           schedule adopted under this Article, any Member who was

                                       -40-
<PAGE>

           covered under such predecessor plan or, in the case of a
           change or amendment to the vesting schedule, any Member who has
           completed at least 3 Years of Employment with such
           Employer, may elect to have the nonforfeitable
           percentage of the portion of his Account which is
           subject to such vesting schedule computed under such
           predecessor plan's vesting provisions, or computed
           without regard to such change or amendment (a "Vesting
           Election").  Any Vesting Election made under this
           Section 1 shall be made by notifying the Thrift Plan
           Office in writing within the election period
           hereinafter described.  The election period shall begin
           on the date such amendment is adopted or the date such
           change is effective, or the date the Plan which serves
           as a successor plan is adopted or effective, as the
           case may be, and shall end no earlier than the latest
           of the following dates:  (i) the date which is 60 days
           after the day such amendment is adopted; (ii) the date
           which is 60 days after the day such amendment or change
           becomes effective; (iii) the date which is 60 days
           after the day the Member is given written notice of
           such amendment or change by the Thrift Plan Office;
           (iv) the date which is 60 days after the day the Plan
           is adopted by the Employer or becomes effective; or (v)
           the date which is 60 days after the day the Member is
           give written notice that the Plan has been designated
           as a successor plan.  Any election made pursuant to
           this Subsection (D) shall be irrevocable.

      (2)  To the extent permitted under the Code and Regulations,
           an Employer described in the foregoing paragraph may
           elect to treat all of its Members who are eligible to
           make a Vesting Election as having made such Vesting
           Election.  Furthermore, subject to the requirements of
           the applicable Regulations, the Employer may elect to
           treat all its Members, who were employed by the
           Employer on or before the effective date of the change
           or amendment, as subject to the prior vesting schedule,
           provided such prior schedule is more favorable.

Section 2.  Forfeitures.

(A)   If a Member who was partially vested in his Account on the
      date of his termination of Employment returns to Employment,
      his years of Employment prior to the Break in Service shall
      be included in determining future vesting and, if he returns
      before incurring 5 consecutive one-year Breaks in Service,
      any Units forfeited from his Account shall be restored to his
      Account; provided, however, that if such a Member has
      received a distribution pursuant to Article VII, Section 3 or
      Article III, Section 8, his Account Units shall not be
      restored unless he repays the full amount distributed to him
      to the Plan before the earlier of (i) 5 years after the first
      date on which the Member is subsequently  reemployed by the
      Employer, or (ii) the close of the first period

                                       -41-
<PAGE>

      of 5 consecutive one-year Breaks in Service commencing after the
      withdrawal.  The Units restored to the Member's  Account will
      be valued on the Valuation Date coincident with or next
      following the later of (i) the date the Employee is rehired,
      or (ii) the date a new enrollment application is received by
      the Thrift Plan Office and (iii) the date the Employee repays
      the full amount previously distributed to him that resulted
      in the forfeiture.  If a Member terminates Employment without
      any vested interest in his Account, he shall (i) immediately
      be deemed to have received a total distribution of his
      Account and (ii) thereupon forfeit his entire Account;
      provided that if such Member returns to Employment before the
      number of consecutive one-year Breaks in Service equals or
      exceeds the greater of (i) 5, or (ii) the aggregate number of
      the Member's Years of Service prior to such Break in Service,
      his Account shall be restored in the same manner as if such
      Member had been partially vested at the time of his
      termination of Employment, and his Years of Employment prior
      to incurring the first Break in Service shall be included in
      any subsequent determination of his vesting service.

(B)   Forfeited amounts, as defined in the preceding Paragraph A,
      shall be made available to the Employer through transfer from
      the Member's Account to the Employer Hold Account, upon: (1)
      if the Member had a vested interest in his Account at his
      termination of Employment, the earlier of (i) the date as of
      which the Member receives a distribution of his entire vested
      interest in his Account or (ii) the date upon which the
      Member incurs 5 consecutive one-year Breaks in Service or (2)
      the date of the Member's termination of Employment, if the
      Member then had no vested interest in his Account.  Once so
      transferred, such amounts shall be used at the option of the
      Employer to (i) reduce administrative expenses (in accordance
      with Article IX, Section 2) for that Contribution
      Determination Period, (ii) offset any contribution to be made
      by such Employer for that Contribution Determination Period,
      or (iii) be allocated to all eligible Members at the end of
      such Contribution Determination Period in accordance with
      clause (ii) of the first sentence in Article III, Section
      8(C)(1).  The Employer Hold Account, referenced in this
      Paragraph (B), shall be maintained to receive, in addition to
      the forfeitures described above, (i) contributions in excess
      of the limitations contained in Section 415 of the Code, as
      described in Article X, Section 1(C), and (ii) Employer
      contributions made in advance of the date allocable to
      Members.

                                       -42-
<PAGE>

                     ARTICLE VII  WITHDRAWAL PAYMENTS

Section 1.  General.

(A)   All payments in respect of a Member's Account shall be made
      in cash from the Trust Fund and in accordance with the
      provisions of this Article or Articles XI or XII or Article
      III, Section 4.  The amount of payment will be determined in
      accordance with the Unit values on the Valuation Date
      coinciding with or next following the date proper notice is
      filed with the Board, unless following such Valuation Date a
      decrease in the Unit values of the Member's investment in any
      of the Investment Funds occurs prior to the date such Units
      of the Member are redeemed in which case that part of the
      payment which must be provided through the sale of existing
      Units shall equal the value of such Units determined on the
      date of redemption which date shall occur as soon as
      administratively practicable on or following the Valuation
      Date such proper notice is filed with the Board.  The
      redemption date Unit value with respect to a Member's
      investment in any Investment Fund shall equal the value of a
      Unit in such Investment Fund, as determined in accordance
      with the valuation method applicable to Unit investments in
      such Fund on the date the Member's investment is redeemed.

      Payments provided under this Section will be made in a lump
      sum as soon as practicable after such Valuation Date or date
      of redemption, as may be applicable, subject to, with respect
      to amounts invested in Investment Fund B, if applicable, the
      provisions of Article XI, Section 3 regarding the transfer of
      guaranteed interest contracts, and with respect to amounts
      invested in any other Investment Fund, subject to any other
      applicable restriction on redemption imposed on amounts
      invested in such Fund.

(B)   At the election of the Employer, the Employer can suspend
      matching contributions to the Plan on behalf of a Member,
      during his uninterrupted period of Service with such
      Employer, who makes a withdrawal from his Regular Account for
      a period of 6 months after such withdrawal, except that (i)
      if the withdrawal does not exceed the amount of the Member's
      contributions in his Regular Account plus earnings thereon,
      Employer contributions on his behalf may resume 3 months
      after such withdrawal, and (ii) if the withdrawal does not
      exceed the amount, if any, of the Member's contributions in
      his Regular Account made prior to January 1, 1987 without
      earnings, then Employer contributions on his behalf shall not
      be affected by such withdrawal.

(C)   Any partial withdrawal from a Member's Regular Account or
      Rollover Account shall be in an amount of at least $1,000 or
      shall be for the full amount of either (a) the Member's
      contributions made prior to January 1, 1987 without earnings or

                                       -43-
<PAGE>

      (b) the Member's contributions plus earnings thereon.  Any
      partial withdrawal shall be deemed to come first from the
      Member's contributions made prior to January 1, 1987 without
      earnings referred to in (ii) above, second proportionately
      from the Member contributions made after December 31, 1986
      plus earnings thereon, and finally from the balance of his
      Regular Account or Rollover Account.

(D)   Any amounts paid under this Article may not be returned to
      the Plan.

Section 2.  Account Withdrawal While Employed.

A Member may voluntarily withdraw his Account (other than his 401(k) Account,
Profit Sharing Account, or Profit Sharing Rollover Amounts, if any) while in
Employment by filing a notice of withdrawal with the Thrift Plan Office;
provided, however, that in the event his Employer has elected to provide
annuity options under Article VII, Section 3(B)(2), no withdrawals may be made
from a married Member's Account without the written consent of such Member's
Spouse (which consent shall be subject to the procedures set forth in Article
III, Section 6(B)).  Only one in-service withdrawal under this Section may be
made in any Plan Year from each of the Member's Regular Account and Rollover
Account.  This restriction shall not, however, apply to a withdrawal of a
Member's contributions made prior to January 1, 1987 without earnings, or a
withdrawal under this Section in conjunction with a hardship withdrawal as
defined under Article III, Section 4(H).

Notwithstanding the foregoing paragraph, a Member shall not withdraw any
Matching, Basic or Supplemental contributions made by his Employer under
Article III, Section 2 or Section 3 and credited to his Regular Account unless
(i) the Member has completed 60 months of participation in the Plan, (ii) the
withdrawal occurs at least 24 months after such Matching, Basic or
Supplemental contributions were made by the Employer, (iii) the Member's
Employer terminates its participation in the Plan or (iv) the Member dies, is
disabled, retires, terminates Employment or attains age 59 1/2. For purposes of
the preceding requirements, if the Member's Account includes amounts which
have been transferred from a defined contribution plan established prior to
the adoption of the Plan by the Member's Employer, the period of time during
which amounts were held on behalf of such Member and the periods of
participation of such Member under such defined contribution plan shall be
taken into account.

Section 3.  Account Withdrawal Upon Termination of Employment or
             Employer Participation.

(A)   Except as provided in Article III, Sections 4 and 8, a Member
      who terminates Employment with a participating Employer, or whose
      Employer terminates its participation in the Plan under Article
      XI, may withdraw his Account at any time thereafter up to
      attainment of age 70 1/2 or, if elected by his Employer in

                                       -44-
<PAGE>

      accordance with the provisions of Article XI, Section 3, may
      transfer his Account, including all outstanding loan
      balances, to a qualified successor plan maintained by his
      Employer following the termination by the Employer of its
      participation under the Plan; provided, however, that the
      Member may not transfer outstanding loan balances unless such
      qualified successor plan provides participant loans.  For
      purposes of this Section 3, a qualified successor plan is an
      employee benefit plan established or maintained by the
      Employer which (i) has received a favorable determination
      letter from the IRS stating that such plan satisfies the then
      current qualification and tax-exemption requirements of the
      Code or with respect to which an opinion of counsel to the
      same effect, and in such form as may be satisfactory to the
      Thrift Plan Office, (ii) has provided the Thrift Plan Office
      with written certification by its appropriate fiduciaries
      that in the event of a transfer to such successor plan of the
      withdrawn assets, the successor plan shall be fully liable
      for the payment of all transferred benefits of the Members of
      such Employer (who consent to the transfer), and that the
      Plan shall not be liable for the payment of any part of such
      benefits, (iii) has provided each Member's written consent to
      the transfer and his release of all claims against the Plan
      arising out of his membership therein, (iv) meets such other
      requirements of the IRS, other appropriate governmental
      authority or of the Board, which may apply, and (v) meets
      such other procedures as may be established by the Board from
      time to time.

      Any withdrawal under this Section requires that a notice of
      withdrawal be filed with the Thrift Plan Office.  If a Member
      does not file such notice, the value of his Account will be
      paid to him as soon as practicable after his attainment of
      age 70 1/2, but in no event shall payment commence later than
      April 1 of the calendar year following the calendar year in
      which the Member attains age 70 1/2, unless otherwise provided
      by law.  Only one withdrawal under this Section may be made
      in any calendar year from each of the Member's Rollover
      Account, Profit Sharing Account, 401(k) Account and Regular
      Account.

(B)   (1)  In lieu of any lump sum payment of his total Account, a
           Member who has terminated his Employment may elect in his
           notice of withdrawal to be paid in up to 10 annual
           installments (or, effective January 1, 1993, in 15 or 20
           annual installments, provided that a Member shall not be
           permitted to elect an installment period in excess of his
           remaining life expectancy and if a Member attempts such an
           election, he shall be deemed to have elected the
           installment period with the next lowest multiple within
           the Member's remaining life expectancy), subject to the
           provisions of Article X, Section 4.  The amount of each
           installment will be equal to the value of the total Units
           in the Member's Account, multiplied by a fraction, the
           numerator of which is one and the denominator of which is

                                       -45-
<PAGE>

           the number of remaining annual installments including
           the one then being paid, so that at the end of the
           installment period so elected, the total Account will be
           liquidated.  The value of the Units will be determined
           in accordance with the Unit values on the Valuation
           Date on or next following the Thrift Plan Office's
           receipt of his notice of withdrawal and on each
           anniversary thereafter.  Payment will be made as soon
           as practicable after each such Valuation Date, but in
           no event shall payment commence later than April 1 of
           the calendar year following the calendar year in which
           the Member attains age 70 1/2 subject to Paragraph (C)
           below.  The election of installments hereunder may not
           be subsequently changed by the Member, except that upon
           written notice to the Thrift Plan Office, the Member
           may withdraw the balance of the Units in his Account in
           a lump sum at any time.

      (2)  Annuity Option.  An Employer who adopts the Plan after
           June 30, 1992 may, at its option, elect to provide an
           annuity option in addition to the lump sum payment and
           installment payment options described in Section 1(A)
           and Subsection (B)(1) above.  In the event an Employer
           elects to provide an annuity option, the following
           provisions shall apply:

           Unmarried Members:  Any unmarried Member who has
           terminated his Employment may elect, in lieu of any
           lump sum or installment payment of his total Account(s)
           under Section 1(A) or Subsection (B) above, to receive
           a benefit payable by purchase from an insurance company
           of a single premium contract providing for (i) a single
           life annuity for the life of the Member or (ii) an
           annuity for the life of the Member and, if the Member
           dies leaving a designated Beneficiary, a 50% survivor
           annuity for the life of such designated Beneficiary.

           Married Members:  Except as otherwise provided below,
           (i) any married Member who has terminated his
           Employment shall receive a benefit payable by purchase
           from an insurance company of a single premium contract
           providing for a Qualified Joint and Survivor Annuity,
           as defined under Section 6(B)(1) of Article III and
           (ii) the Surviving Spouse of any married Member who
           dies prior to the date payment of his benefit commences
           shall be entitled to a Preretirement Survivor Annuity,
           as defined under Section 6(B)(4) of Article III.
           Notwithstanding the foregoing, any such married Member
           may elect to receive his benefit in any other available
           form, and may waive the Preretirement Survivor Annuity,
           in accordance with the spousal consent provisions of
           Section 6(B) of Article III.

(C)   In no event may payment of a Member's Account begin later than
      April 1 of the year following the calendar year in which a Member

                                       -46-
<PAGE>


      attains age 70 1/2; provided, however, if a Member
      attained age 70 1/2 prior to January 1, 1988, except as
      otherwise provided below, any benefit payable to such Member
      shall commence no later than the April 1 of the calendar year
      following the later of (i) the calendar year in which the
      Member attains age 70 1/2 or (ii) the calendar year in which the
      Member retires.

      If a Member who is a 5% owner attained age 70 1/2 before January
      1, 1988, any benefit payable to such Member shall commence no
      later than the April 1 of the calendar year following the
      later of (i) the calendar year in which the Member attains
      age 70 1/2 or (ii) the earlier of (A) the calendar year within
      which the Member becomes a 5% owner or (B) the calendar year
      in which the Member retires.  For purposes of the preceding
      sentence, 5% owner shall mean a 5% owner of such Member's
      Employer as defined in Section 416(i) of the Code at any time
      during the Plan Year in which such owner attains age 66 1/2 or
      any subsequent Plan Year.  Distributions must continue to
      such Member even if such Member ceases to own more than 5% of
      the Employer in a subsequent year.

      Unless the Member elects otherwise, distribution of benefits
      will begin no later than the 60th day after the latest of the
      close of the Plan Year in which (i) the Member attains age
      65; (ii) occurs the 10th anniversary of the year in which the
      Member commenced participation in the Plan; or (iii) the
      Member terminates Employment with an Employer.
      Notwithstanding the foregoing, the failure of a Member and
      Spouse to consent to a distribution while a benefit is
      immediately distributable shall be deemed to be an election
      to defer commencement of payment of any benefit.

(D)   This Subsection (D) applies to distributions made on or after
      January 1, 1993.  Solely to the extent required under
      applicable law and regulations, and notwithstanding any
      provision of the Plan to the contrary that would otherwise
      limit a Distributee's election under this Subsection (D), a
      Distributee may elect, at the time and in the manner
      prescribed by the Board, to have any portion of an Eligible
      Rollover Distribution paid directly to an Eligible Retirement
      Plan specified by the Distributee in a Direct Rollover.

      For purposes of this Subsection (D), the following terms
      shall have the following meanings:

      (1)  Eligible Rollover Distribution:  Solely to the extent
           required under applicable law and regulations, an Eligible
           Rollover Distribution is any distribution of all or any
           portion of the balance to the credit of the Distributee,
           except that an Eligible Rollover Distribution does not
           include: any distribution that is one of a series of
           substantially equal periodic payments (not less frequently
           than annually) made for the life (or life expectancy) of
           the Distributee or the joint lives (or joint life

                                       -47-
<PAGE>

           expectancies) of the Distributee and the Distributee's
           designated beneficiary, or for a specified period of ten
           years or more; any distribution to the extent such distribution
           is required under Section 401(a)(9) of the Code; and
           the portion of any distribution that is not includible
           in gross income (determined without regard to the
           exclusion for net unrealized appreciation with respect
           to employer securities).

      (2)  Eligible Retirement Plan:  An Eligible Retirement Plan
           is an individual retirement account described in
           Section 408(a) of the Code, an individual retirement
           annuity described in Section 408(b) of the Code, an
           annuity plan described in Section 403(a) of the Code,
           or a qualified trust described in Section 401(a) of the
           Code, that accepts the Distributee's Eligible Rollover
           Distribution.  However, in the case of an Eligible
           Rollover Distribution to a Surviving Spouse, an
           Eligible Retirement Plan is an individual retirement
           account or individual retirement annuity.

      (3)  Distributee:  A Distributee includes an employee or
           former employee.  In addition, the employee's or former
           employee's Surviving Spouse and the employee's or
           former employee's spouse or former spouse who is the
           alternate payee under a qualified domestic relations
           order, as defined in Section 414(p) of the Code, are
           Distributees with regard to the interest of the spouse
           or former spouse.

      (4)  Direct Rollover:  A Direct Rollover is a payment by the
           Plan to the Eligible Retirement Plan specified by the
           Distributee.

Section 4.  Account Withdrawal Upon Member's Disability.

(A)   A Member who is separated from Employment by reason of a
      disability which is expected to last in excess of 12
      consecutive months and who is either (i) eligible for, or is
      receiving, disability insurance benefits under the Federal
      Social Security Act, (ii) approved for disability under the
      provisions of The Comprehensive Retirement Program of the
      Financial Institutions Retirement Fund (a defined benefit pension
      plan through which federally insured financial
      institutions and organizations serving them may cooperate in
      providing for the retirement of their employees), or (iii)
      approved for disability under the provisions of any other
      benefit program or policy maintained by his Employer, which
      policy or program is applied on a uniform and
      nondiscriminatory basis to all Employees of such Employer,
      shall be deemed to be disabled for all purposes under the
      Plan.

(B)   The Thrift Plan Office shall determine whether a Member is
      disabled in accordance with the terms of Paragraph (A) above;

                                       -48-
<PAGE>

      provided, however, approval of Disability is conditioned upon
      notice to the Thrift Plan Office of such Member's Disability
      by the Employer within 13 months of the Member's separation
      from Employment.  The notice of Disability shall include a
      certification that the Member meets one or more of the
      criteria listed in Paragraph (A) above.

(C)   Upon an Employer's filing a written notice of Disability, a
      Member may withdraw his total Account balance under the Plan
      (including his Rollover Account and/or total Profit Sharing
      Account balance, if any) and have such amounts paid to him in
      accordance with Article VII, Section 3.  In lieu of such lump
      sum payment, the Member may elect in his notice of withdrawal
      to (i) defer receipt of some or all of his vested Account
      until April 1 of the calendar year following the calendar
      year in which the Member attains 70 1/2, (ii) elect installment
      payments, as described in Section 3(B) of this Article and
      Article III, Section 8(E)(2), or (iii) make periodic
      withdrawals not more frequently than once per year pursuant
      to the provisions of Article VII, Section 1; provided,
      however, if a disabled Member becomes reemployed subsequent
      to withdrawal of some or all of his Account balance, such
      Member may not repay to the Plan any such withdrawn amounts.

Section 5.  Member's Death.

(A)   Subject to Section 3(B)(2) above, if a married Member dies,
      his Spouse, as Beneficiary, will receive a death benefit
      equal to the value of the Member's Account determined on the
      Valuation Date on or next following the Board's receipt of
      notice that such Member died; provided, however, that if such
      Member's Spouse had consented in writing to the designation
      of a different Beneficiary, the Member's Account will be paid
      to such designated Beneficiary.  Such nonspousal designation
      may be revoked by the Member without spousal consent at any
      time prior to the Member's death.  If a Member is not married
      at the time of his death, his Account will be paid to his
      designated Beneficiary.

(B)   Subject to Section 3(B)(2) above, a Member may elect that
      upon his death, his Beneficiary, pursuant to Paragraph (A)
      above, may receive, in lieu of any lump sum payment, payment
      in 5 annual installments (10 if the Spouse is the
      Beneficiary, provided that the Spouse's remaining life
      expectancy is at least 10 years) whereby the value of 1/5th
      of such Member's Units (or 1/10th in the case of a spousal
      Beneficiary, provided that the Spouse's remaining life
      expectancy is at least 10 years) in each Investment Fund will
      be determined in accordance with the Unit values on the
      Valuation Date on or next following the Board's receipt of
      notice of the Member's death and on each anniversary of such
      Valuation Date.  Payment will be made as soon as practicable
      after each Valuation Date until the Member's Account is
      exhausted.  Such election may be filed at any time with the
      Board prior to the Member's death and may not be changed or

                                       -49-
<PAGE>

      revoked after such Member's death.  If such an election is
      not in effect at the time of the Member's death, his
      Beneficiary (including any spousal Beneficiary) may elect to
      make withdrawals in accordance with this Article, except that
      any balance remaining in the deceased Member's Account must
      be withdrawn on or before the December 31 of the calendar
      year which contains the 5th anniversary (the 10th anniversary
      in the case of a spousal Beneficiary, provided that the
      Spouse's remaining life expectancy is at least 10 years) of
      the Member's death.  Notwithstanding the foregoing provisions
      of this Paragraph (B), payment of a Member's Account shall
      commence not later than the December 31 of the calendar year
      immediately following the calendar year in which the Member
      died or, in the event such Beneficiary is the Member's
      Surviving Spouse, on or before the December 31 of the
      calendar year in which such Member would have attained age
      70 1/2, if later (or, in either case, on any later date
      prescribed by the IRS Regulations).  If, upon the Spouse's or
      Beneficiary's death, there is still a balance in the Account,
      the value of the remaining Units will be paid in a lump sum
      to such Spouse's or Beneficiary's estate.  Notwithstanding
      anything in this Subsection (B) to the contrary, if a Member
      dies after distribution of his or her interest has begun, the
      remaining portion of such interest will continue to be
      distributed at least as rapidly as under the method of
      distribution being used prior to the Member's death.  In
      addition, to the extent any payments from a Member's Account
      would be made after a Member's death to a beneficiary other
      than the Member's Spouse, such payments shall be made in
      accordance with Section 401(a)(9) of the Code and the IRS
      Regulations thereunder.  In addition, to the extent any
      payments from a Member's Account would be made after a
      Member's death, such payments shall be made in accordance
      with Section 401(a)(9) of the Code and the IRS Regulations
      thereunder (including the minimum distribution incidental
      benefit requirements).

                                       -50-
<PAGE>

                        ARTICLE VIII  LOAN PROGRAM

Section 1.  General.

An Employer may, at its option, make available this loan program for any
Member (and, if applicable under Section 8 of this Article, any Beneficiary),
subject to applicable law, except that (i) no loans may be made from a
Member's Profit Sharing Account as set forth in Article III, Section 8 or from
a Member's Profit Sharing Rollover Amounts, if any and (ii) in the event his
Employer has elected to provide annuity options under Article VII, Section
3(B)(2), or amounts are transferred to the Plan from a retirement plan subject
to Section 401(a)(11) of the Code, no loans may be made from a married
Member's Account without the written consent of such Member's Spouse which
shall be obtained no earlier than the beginning of the 90-day period that ends
on the date on which the loan is to be secured by any portion of such Member's
Account.  The consent must be in writing, must acknowledge the effect of the
loan, and must be notarized.  Such consent shall thereafter be binding with
respect to the consenting Spouse or any subsequent Spouse with respect to that
loan.  In the event an Employer elects the loan program under this Article
VIII, loans shall be available from the Rollover Accounts of any Employees of
the Employer who have not yet become Members.

Section 2.  Loan Application.

(A)   Subject to the restrictions described in Paragraph (B) of
      this Section, a Member in Employment may borrow from his
      Account in the Investment Funds by filing an application with
      the Thrift Plan Office.  Such application (hereinafter
      referred to as a "completed application") shall (i) specify
      the terms pursuant to which the loan is requested to be made
      and (ii) provide such information and documentation as the
      Board shall require, including a note, duly executed by the
      Member, granting a security interest of an amount not greater
      than 50% of his vested Account, to secure the loan.  With
      respect to such Member, the completed application shall
      authorize the repayment of the loan through payroll
      deductions.  Such loan will become effective upon the
      Valuation Date coinciding with or next following the date on
      which his completed application and other required documents
      were received by the Thrift Plan Office, subject to the same
      conditions with respect to the amount to be transferred under
      this Section which are specified in the Plan procedures for
      determining the amount of payments made under Article VII,
      Section 1(A) of the Plan.

(B)   The Board shall establish standards in accordance with the Code
      and ERISA which shall be uniformly applicable to all Members
      eligible to borrow from their interests in the Trust Fund

                                       -51-
<PAGE>

      similarly situated and shall govern the approval or
      disapproval of completed applications.  The terms for each
      loan shall be set solely in accordance with such standards.

(C)   In accordance with the Board's established standards, each
      completed application shall be reviewed and approved or
      disapproved as soon as practicable after the receipt thereof,
      and the applying Member shall be promptly notified of such
      approval or disapproval.  Notwithstanding the foregoing, the
      review of a completed application, or payment of the proceeds
      of an approved loan, may be deferred if the proceeds of the
      loan would otherwise be paid during the period commencing on
      December 1 and ending on the following January 31.

(D)   Subject to Paragraph (C) of this Section and Paragraph (C) of
      Section 6 of this Article VIII, upon approval of a completed
      application, payment of the loan to the Member shall be made
      from the Investment Fund(s) in the same proportion that the
      Member's Regular Account, 401(k) Account and/or Rollover
      Account, as applicable, are invested at the time of the loan,
      and the relevant portion of the Member's interest in such
      Investment Fund(s) shall be cancelled and shall be
      transferred in cash to the Member.  The Thrift Plan Office
      shall maintain sufficient records regarding such amounts to
      permit an accurate crediting of repayments of the loan.

Section 3.  Permitted Loan Amount.

The amount of each loan may not be less than $1,000 nor more than the maximum
amount as described below.  The maximum amount available for loan under the
Plan (when added to the outstanding balance of all other loans from the Plan
to the borrowing Member) shall not exceed the lesser of:  (a) $50,000 reduced
by the excess (if any) of (i) the highest outstanding loan balance
attributable to the Account of the Member requesting the loan from the Plan
during the one-year period ending on the day preceding the date of the loan,
over (ii) the outstanding balance of all other loans from the Plan to the
Member on the date of the loan, or (b) 50 percent of the value of the Member's
vested Account (excluding the Member's interest in his Profit Sharing Account
and his Profit Sharing Rollover Amounts, if any) based on the latest available
information on the date on which the Thrift Plan Office receives the completed
ap plication for the loan and other required documents.  The maximum amount
available for a loan for purposes of item (b) of the preceding sentence shall
be determined by valuing the Member's interest in his 401(k) Account, his
Regular Account and his Rollover Account, as of the applicable Valuation Date,
regardless of whether the 401(k) Account is available for loan, provided that,
with respect to Members whose Employer has not elected to make the 401(k)
Account available for loans, then in no event shall the amount of the loan
exceed the value of such Member's Regular Account and his Rollover Account.

                                       -52-
<PAGE>

Section 4.  Source of Funds for Loan.

The amount of the loan will be deducted from the Member's Account in the
Investment Funds in accordance with Section 2(D) of this Article and the Plan
procedures for determining the amount of payments made under Article VII,
Section 1(A).  If an Employer elects to make loans available both from a
Member's Regular Account and his 401(k) Account, the Member may designate the
account from which the loan shall be allocable.  Notwithstanding the
foregoing, effective January 1, 1993, a Member or Employee whose Employer has
elected the loan program under this Article VIII may also designate that his
loan be made from his Rollover Account.  The account from which the Member
first chooses to borrow must be exhausted before the Member can borrow any
amount from the other account.  A loan from either the 401(k) Account or the
Regular Account will first be allocable out of amounts not previously taxed
and then, to the extent necessary, out of the Member's Regular contributions
(if any).

Section 5.  Conditions of Loan.

(A)   Each loan to a Member under the Plan shall be repaid in level
      monthly amounts through regular payroll deductions after the
      effective date of the loan, and continuing thereafter with
      each payroll.  Except as otherwise required by the Code and
      the IRS Regulations, each loan shall have a repayment period
      of not less than 24 months and not in excess of 60 months.
      Notwithstanding the foregoing, each loan made after December
      31, 1992 shall have a repayment period of (i) at least 12
      months and (ii) if the purpose of the loan is the purchase of
      a primary residence, not more than 180 months.

(B)   The rate of interest for the term of the loan will be
      established as of the loan date, and will be the Barron's
      Prime Rate (base rate) plus 1% as published on the last
      Saturday of the preceding month, or such other rate as may be
      required by applicable law and determined by reference to the
      prevailing interest rate charged by commercial lenders under
      similar circumstances.  The applicable rate would then be in
      effect through the last business day of the month.

(C)   Repayment of all loans under the Plan shall be secured by 50%
      of the Member's vested interest in his Regular Account, his
      401(k) Account and his Rollover Account, if any, determined
      as of the origination of such loan; provided, however, that
      repayment shall be secured by the Member's interest in his
      401(k) Account, to the extent applicable, only for such time,
      and to the extent that, a portion of such loan is allocated
      to such account.

(D)   Only one loan may be made to a Member in the Plan Year from
      each of his (i) Rollover Account and (ii) 401(k) Account and
      Regular Account.

                                       -53-
<PAGE>

Section 6.  Crediting of Repayment.

(A)   Upon lending any amount to a Member, the Board shall
      establish and maintain a loan receivable account with respect
      to, and for the term of, the loan.  The allocations described
      in this Section shall be made from the loan receivable
      account.

(B)   Upon receipt of each monthly installment payment and the
      crediting thereof to the Member's loan receivable account,
      there shall be allocated to the Member's Account in the
      Investment Funds in accordance with his most recent
      investment instructions, the principal portion of the
      installment payment plus that portion of the interest equal
      to the rate determined in Section 5(B) of this Article, less
      2%.

(C)   The unpaid balance owed by a Member on a loan under the Plan
      shall not reduce the amount credited to his Account.
      However, from the time of payment of the proceeds of the loan
      to the Member, such Account shall be deemed invested, to the
      extent of such unpaid balance, in such loan until the
      complete repayment thereof or distribution from such Account.
      Any loan repayment shall first be deemed allocable to a
      Member's Regular Account contributions, then earnings on such
      Member's Regular Account contributions and finally Employer
      contributions plus earnings.  Notwithstanding the preceding
      sentence, any loan repayment of amounts derived from a
      Member's 401(k) Account, Regular Account and Rollover Account
      shall be applied to such accounts on a proportionate basis
      that reflects the allocable portion of those Member accounts
      deemed invested in the loan.

Section 7.  Cessation of Payments on Loan.

(A)   If a Member, while employed, fails to make a monthly
      installment payment when due, as specified in the completed
      application, subject to applicable law, he will be deemed to
      have received a distribution of the outstanding balance of
      the loan.  If such default occurs after the first 24 monthly
      payments (or, effective January 1, 1993, the first 12 monthly
      payments) of the loan have been satisfied, the Member may pay
      the outstanding balance, including accrued interest from the
      due date, within 60 days of the due date of the last monthly
      installment payment, in which case no such distribution will
      be deemed to have occurred.  Subject to applicable law,
      notwithstanding the foregoing, a Member that borrows amounts
      from his 401(k) Account may not cease to make monthly
      installment payments while employed and receiving a Salary
      from the Employer.

(B)   Except as otherwise provided under Section 8 below, upon a
      Member's termination of Employment, death or Disability, or
      the termination of his Employer's participation in the Plan,
      no further monthly installment payments may be made.  Unless
      the outstanding balance, including accrued interest from the due

                                       -54-
<PAGE>

      date, is paid within 60 days of the date of such
      occurrence, the Member will be deemed to have received a
      distribution of the outstanding balance of the loan including
      accrued interest from the due date.  This Subsection (B)
      shall also apply to a Member (i) whose Employer terminates
      its participation in the Plan without establishing or
      maintaining a qualified successor plan (as defined in Article
      VII, Section 3) to which the Member's Account could be
      transferred, (ii) who elects not to transfer the total
      accumulated balance of his Account to such qualified
      successor plan, as provided under Article VII, Section 3(A),
      where the Employer has satisfied all conditions and
      requirements to permit such transfer, or (iii) who fails to
      transfer outstanding loan balances as provided under Article
      VII, Section 3(A)(2).

Section 8.  Loans to Former Members and Beneficiaries.

Notwithstanding any other provisions of this Article VIII, (i) effective July
1, 1992, a Member who terminates Employment for any reason or whose Employer
terminates participation in the Plan (a "Terminated Member") shall be
permitted to continue making scheduled repayments with respect to any loan
balance outstanding at the time he becomes a Terminated Member and (ii)
effective November 1, 1992, any Terminated Member (or Beneficiary) shall be
permitted to borrow from his Account if his Employer (or the Employer of the
Member with respect to whom he is a Beneficiary) permitted loans under the
Plan at the time he became a Terminated Member (or became entitled to benefits
as a Beneficiary).  If any individual who continues to make repayments or who
borrows from his Account pursuant to this Section 8 fails to make a monthly
installment payment within 60 days of the scheduled payment date, he will be
deemed to have received a distribution of the outstanding balance of the loan.

                                       -55-
<PAGE>

                    ARTICLE IX  ADMINISTRATION OF PLAN

Section 1.  Board of Directors.

(A)   The general administration of the Plan and the general
      responsibility for carrying out the provisions of the Plan
      shall be placed in a Board of Directors who must be Members
      of the Plan.  The President of the Plan shall be the chief
      administrative officer of the Plan, a member ex officio of
      the Board and, for purposes of ERISA, the "plan
      administrator."  The Board shall constitute the "named
      fiduciary" for purposes of ERISA.  The Board may adopt, and
      amend from time to time, by-laws not inconsistent with the
      Trust and the Plan and shall have such duties and exercise
      such powers as are provided in the Plan, Trust Agreement and
      by-laws.  The number of Directors, their method of election
      and their terms of office shall be governed by such by-laws.
      The Board shall hold an annual meeting each year and may hold
      additional meetings from time to time.

(B)   The Board members shall serve without compensation, but shall
      be reimbursed for any reasonable expenses incurred in their
      capacities as Board members.  Neither the Plan Administrator,
      nor any Board member, officer or employee of the Plan shall
      be personally liable by virtue of any contract or other
      instrument executed by him or on his behalf in such capacity
      nor for any mistake of judgment made in good faith.  Each
      Employer, by its participation in the Plan, agrees that each
      member of the Board and officer and employee of the Plan
      shall be indemnified by the Employer for any liability, in
      excess of that which is covered by insurance, arising out of
      any act or omission to act in connection with the Plan,
      except for fraud or willful misconduct.  The obligation to
      pay any such expense shall be allocated among the Employers
      by the Board in such manner as the Board deems equitable.

(C)   The Board shall elect from its membership a chairman and a
      vice-chairman of the Board, and shall elect such other
      officers of the Plan as the Board deems desirable.  The Board
      may appoint committees and shall arrange for such legal,
      accounting, investment advisory or management, administrative
      and other services as it deems appropriate to carry out the
      Plan, and may act in reliance upon the advice and actions of
      the persons or firms providing such services.  The Board may
      delegate to any committee, officer, employee or agent the
      authority to perform any act pertaining to the Plan or the
      administration thereof.  No Employer shall under any
      circumstances or for any purpose be deemed an agent of the
      Board.  The Board shall cause to be maintained proper
      accounts and accounting procedures and shall submit an Annual
      Report on the operations of the Plan to each Employer for the
      information of its members.  The Board may adopt

                                       -56-
<PAGE>

      by-laws governing the conduct of its affairs and may amend such
      by-laws from time to time.

(D)   The Board shall have the exclusive right to interpret the
      Plan and to determine any question arising under or in
      connection with the administration of the Plan.  Its decision
      or action in respect thereof shall be conclusive and binding
      upon all persons having an interest in the Trust or under the
      Plan.  The Board shall have no duty to see that contributions
      received by the Trustee under the Plan comply with the
      provisions of the Plan, nor any duty to enforce payment of
      any contributions under the Plan.

(E)   (1)  All claims for benefits under the Plan shall be
           submitted in writing to, and within a reasonable period
           of time decided by, the President of the Plan.  If the
           claim is wholly or partially denied, written notice of
           the denial shall be furnished within 90 days after
           receipt of the claim; provided that, if special
           circumstances require an extension of time for
           processing the claim, an additional 90 days from the
           end of the initial period shall be allowed for
           processing the claim, in which event the claimant shall
           be furnished with a written notice of the extension
           prior to the termination of the initial 90-day period
           indicating the special circumstances requiring an
           extension.  The written notice denying the claim shall
           set forth the reasons for the denial, including
           specific reference to pertinent provisions of the Plan
           on which the denial is based, a description of any
           additional information necessary to perfect the claim
           and information regarding review of the claim and its
           denial.

      (2)  A claimant may review all pertinent documents and may
           request a review by the Board, at the office of the
           Plan, of a decision denying the claim.  Such a request
           shall be made in writing and filed with the Board
           within 60 days after delivery to the claimant of
           written notice of the decision.  Such written request
           for review shall contain all additional information
           which the claimant wishes the Board to consider.  The
           Board may hold a hearing or conduct an independent
           investigation, and the decision on review shall be made
           as soon as possible after the Board's receipt of the
           request for review.  Written notice of the decision on
           review shall be furnished to the claimant within 60
           days after receipt by the Board of a request for
           review, unless special circumstances require an
           extension of time for processing, in which event an
           additional 60 days shall be allowed for review and the
           claimant shall be so notified in writing.  Written
           notice of the decision on review shall include specific
           reasons for the decision.  For all purposes under the
           Plan, such decision on claims (where no review is
           requested) and decision on review (where review

                                       -57-
<PAGE>

           is requested) shall be final, binding and conclusive on all
           interested persons as to participation and benefits
           eligibility, the amount of benefits and as to any other
           matter of fact or interpretation relating to the Plan.

Section 2.  Trust Agreement.

(A)   The Board shall enter into one or more Trust Agreements with
      a Trustee or Trustees selected by the Board.  The Trust
      established under any such agreement shall be a part of the
      Plan and shall provide that all funds received by the Trustee
      as contributions under the Plan and the income therefrom
      (other than such part as is necessary to pay the expenses and
      charges referred to in Paragraph (B) of this Section) shall
      be held in the Trust Fund for the exclusive benefit of the
      Members or their Beneficiaries, and managed, invested and
      reinvested and distributed by the Trustee in accordance with
      the Plan.  Sums received for investment may be invested (i)
      wholly or partly through the medium of any common, collective
      or commingled trust fund maintained by a bank or other
      financial institution and which is qualified under Sections
      401(a) and 501(a) of the Code and constitutes a part of the
      Plan, or (ii) wholly or partly through the medium of a group
      annuity or other type of contract issued by an insurance
      company and constituting a part of the Plan, and utilizing,
      under any such contract, general, commingled or individual
      investment accounts.  Subject to the provisions of Article
      XII, the Board may from time to time and without the consent
      of any Employer, Member or Beneficiary (a) amend the Trust
      Agreement or any such insurance contract in such manner as
      the Board may deem necessary or desirable to carry out the
      Plan, (b) remove the Trustee and designate a successor
      Trustee upon such removal or upon the resignation of the
      Trustee, and (c) provide for an alternate funding agency
      under the Plan.  The Trustee shall make payments under the
      Plan only to the extent, in the amounts, in the manner, at
      the time, and to the persons as shall from time to time be
      set forth and designated in written authorizations from the
      Board.

(B)   The Trustee shall from time to time charge against and pay
      out of the Trust Fund taxes of any and all kinds whatsoever
      which are levied or assessed upon or become payable in
      respect of such Fund, the income or any property forming a
      part thereof, or any security transaction pertaining thereto.
      To the extent not paid by the Employers, the Trustee shall
      also charge against and pay out of the Trust Fund other
      expenses incurred by the Trustee in the performance of its
      duties under the Trust, the expenses incurred by the Board in
      the performance of its duties under the Plan (including
      reasonable compensation for agents and cost of services
      rendered in respect of the Plan), such compensation of the
      Trustee as may be agreed upon from time to time between the
      Board and the Trustee, and all other proper charges and
      disbursements of the Trustee or the Board.

                                       -58-
<PAGE>

                    ARTICLE X  MISCELLANEOUS PROVISIONS


Section 1.  General Limitations.

(A)   In order that the Plan be maintained as a qualified plan and
      trust under the Code, contributions in respect of a Member
      shall be subject to the limitations set forth in this
      Section, notwithstanding any other provision of the Plan.
      The contributions in respect of a Member to which this
      Section is applicable are his own contributions and his
      Employer's contributions.

      For purposes of this Section 1, a Member's contributions
      shall be determined without regard to any rollover
      contributions (as defined by Section 401(a)(5) of the Code).

(B)   Annual additions to a Member's Account (including his 401(k)
      and Regular Accounts and his Profit Sharing Account) and to
      any other defined contribution plan maintained by the
      Member's Employer in respect of any Plan Year may not exceed
      the limitations set forth in Section 415 of the Code, which
      are incorporated by reference.  For these purposes, "annual
      additions" shall have the meaning set forth in Section
      415(c)(2) of the Code, as modified elsewhere in the Code and
      the Regulations, and the limitation year shall mean the Plan
      Year unless any other twelve-consecutive-month period is
      designated pursuant to a written resolution adopted by the
      Employer and approved by the Board.  If a Member in the Plan
      also participates in any defined benefit plan (as defined in
      Sections 414(j) and 415(k) of the Code) maintained by the
      Employer or any of its Affiliates, in the event that in any
      Plan Year the sum of the Member's "defined benefit fraction"
      (as defined in Section 415(e)(2) of the Code) and the
      Member's "defined contribution fraction" (as defined in
      Section 415(e)(3) of the Code) exceeds 1.0, the benefit under
      such defined benefit plan or plans shall be reduced in
      accordance with the provisions of that plan or those plans,
      so that the sum of such fractions in respect of the Member
      will not exceed 1.0.  If this reduction does not ensure that
      the limitation set forth in this Paragraph (B) is not
      exceeded, then the annual addition to any defined
      contribution plan, other than the Plan, shall be reduced in
      accordance with the provisions of that plan but only to the
      extent necessary to ensure that such limitation is not
      exceeded.

(C)   In the event that, due to forfeitures, reasonable error in
      estimating a Member's compensation, or other limited facts and
      circumstances, total contributions to a Member's Account are
      found to exceed the limitations of this Section, the Board shall
      cause contributions made under Article III, Section 1 in excess
      of such limitations to be refunded to the affected Member, with
      earnings thereon, and shall take appropriate steps to reduce, if
      necessary, the Employer contributions made with respect to those

                                       -59-
<PAGE>

      returned contributions.  Such refunds shall not be deemed to be
      withdrawals, loans, or distributions from the Plan.  If a
      Member's annual contributions exceed the limitations
      contained in Paragraph (B) of this Section after the Member's
      Article III, Section 1 contributions, with earnings thereon,
      if any, have been refunded to such Member, the Profit Sharing
      contribution to be allocated to any Member in respect of any
      Contribution Determination Period (including allocations as
      provided in this Paragraph) shall instead be allocated to or
      for the benefit of all other Members who are Employees in
      Employment as of the last day of the Contribution
      Determination Period as determined under Article III, Section
      8(C) and allocated in the same proportion that each such
      Member's Salary for such Contribution Determination Period
      bears to the total Salary for such Contribution Determination
      Period of all such Members or, the Board may, at the election
      of the Employer, utilize such excess to reduce the
      contributions which would otherwise be made for the
      succeeding Contribution Determination Period by the Employer.
      If, with respect to any Contribution Determination Period,
      there is an excess Profit Sharing contribution, and such
      excess cannot be fully allocated in accordance with the
      preceding sentence because of the limitations prescribed in
      Paragraph (B) of this Section, the amount of such excess
      which cannot be so allocated shall be allocated to the
      Employer Hold Account and made available to the Employer
      pursuant to the terms of Article VI, Section 2(B)(2) except
      that any such excess contribution may not be applied to
      reduce administrative expenses (in accordance with Article
      IX, Section 2).  The Board, in accordance with Paragraph (D)
      of this Section, shall take whatever additional action may be
      necessary to assure that contributions to Members' Accounts
      meet the requirements of this Section.

(D)   In addition to the steps set forth in Paragraph (C) above,
      the Board may from time to time adjust or modify the maximum
      limitations applicable to contributions made in respect of a
      Member under this Section 1 as may be required or permitted
      by the Code or ERISA prior to or following the date that
      allocation of any such contributions commence and shall take
      appropriate action to real locate the annual contributions
      which would otherwise have been made but for the application
      of this Section.

(E)   Membership in the Plan shall not give any Employee the right
      to be retained in the Employment of his Employer and shall
      not affect the right of the Employer to discharge any
      Employee.

(F)   Each Member, Spouse and Beneficiary assumes all risk in
      connection with any decrease in the market value of the assets of
      the Trust Fund.  Neither the Board nor the Trustee guarantees
      that upon withdrawal the value of a Member's Account, his Profit
      Sharing Account, and/or his Rollover Account will be equal to or
      greater than the amount of the Member's own deferrals or

                                       -60-
<PAGE>

      contributions, or those credited on his behalf in which the
      Member has a vested interest, under the Plan.

(G)   The establishment, maintenance or crediting of a Member's
      Account pursuant to the Plan shall not vest in such Member
      any right, title or interest in the Trust Fund except at the
      times and upon the terms and conditions and to the extent
      expressly set forth in the Plan and the Trust Agreement.

(H)   The Trust Fund shall be the sole source of payments under the
      Plan and the Employer and the Board assume no liability or
      responsibility for such payments, and each Member, Spouse or
      Beneficiary who shall claim the right to any payment under
      the Plan shall be entitled to look only to the Trust Fund for
      such payment.  All contributions to the Trust Fund shall be
      deemed to have been made in the State of New York.

Section 2.  Top Heavy Provisions.

In respect of any Employer, the Plan will be considered a Top Heavy Plan for
any Plan Year if it is determined to be a Top Heavy Plan as of the last day of
the preceding Plan Year.  The provisions of this Section 2 shall apply and
supersede all other provisions in the Plan during each Plan Year with respect
to which the Plan, with regard to such Employer, is determined to be a Top
Heavy Plan.

(A)   For purposes of this Section 2, the following terms shall
      have the meanings set forth below:

      (1)  "Affiliate" shall mean any entity affiliated with any
           Employer within the meaning of Section 414(b), 414(c)
           or 414(m) of the Code, or pursuant to the IRS
           Regulations under Section 414(o) of the Code, except
           that for purposes of applying the provisions hereof
           with respect to the limitation on contributions,
           Section 415(h) of the Code shall apply.

      (2)  "Aggregation Group" shall mean the group composed of
           each qualified retirement plan of the Employer or an
           Affiliate in which a Key Employee is a member and each
           other qualified retirement plan of the Employer or an
           Affiliate which enables a plan of the Employer or an
           Affiliate in which a Key Employee is a member to
           satisfy Sections 401(a)(4) or 410 of the Code.  In
           addition, the Board may choose to treat any other
           qualified retirement plan as a member of the
           Aggregation Group if such Aggregation Group will
           continue to satisfy Sections 401(a)(4) and 410 of the
           Code with such plan being taken into account.

      (3)  "Key Employee" shall mean a "Key Employee" as defined
           in Sections 416(i)(1) and (5) of the Code and the IRS
           Regulations.  For purposes of Section 416 of the Code and

                                       -61-
<PAGE>

           for purposes of determining who is a Key Employee,
           an Employer which is not a corporation may have
           "officers" only for Plan Years beginning after December
           31, 1985.  For purposes of determining who is a Key
           Employee pursuant to this Subparagraph (3),
           compensation shall have the meaning prescribed in
           Section 414(s) of the Code, or to the extent required
           by the Code or the IRS Regulations, Section 1.415-2(d)
           of the IRS Regulations.

      (4)  "Non-Key Employee" shall mean a "Non-Key Employee" as
           defined in Section 416(i)(2) of the Code and the IRS
           Regulations thereunder.

      (5)  "Top Heavy Plan" shall mean a "Top Heavy Plan" as
           defined in Section 416(g) of the Code and the IRS
           Regulations thereunder.

      (6)  "Determination Date" shall mean the last day of the
           preceding Plan Year or, in the case of the first Plan
           Year, the last day of such Plan Year.

      (7)  "Top Heavy Ratio" - is a fraction, the numerator of
           which is the sum of the account balances of all Key
           Employees as of the applicable Determination Date
           (including any part of any account balance distributed
           in the five year period ending on the Determination
           Date), and the denominator of which is the sum of all
           account balances (including any part of any account
           balance distributed in the five year period ending on
           the Determination Date), both computed in accordance
           with Section 416 of the Code and the IRS Regulations
           thereunder.

(B)   Subject to the provisions of Paragraph (D) below, for each
      Plan Year that the Plan is a Top Heavy Plan, the Employer's
      contribution allocable to each Employee (other than a Key
      Employee) who has satisfied the eligibility requirement(s) of
      Article II, Section 2, and who is in service at the end of the
      Plan Year shall not be less than the lesser of (i) 3% of such
      eligible Employee's compensation (as defined in Section 414(s) of
      the Code or to the extent required by the Code or the IRS
      Regulations, Section 1.415-2(d) of the Regulations), provided
      that for any Plan Year beginning on or after January 1, 1994 no
      more than $150,000 (adjusted for cost of living to the extent
      permitted by the Code and the IRS Regulations) shall be taken
      into account), or (ii) the percentage at which Employer
      contributions for such Plan Year are made and allocated on behalf
      of the Key Employee for whom such percentage is the highest.  For
      the purpose of determining the appropriate percentage under
      clause (ii), all defined contribution plans required to be
      included in an Aggregation Group shall be treated as one plan.
      Clause (ii) shall not apply if the Plan is required to be

                                       -62-
<PAGE>

      included in an Aggregation Group which enables a defined benefit
      plan also required to be included in said Aggregation Group to
      satisfy Sections 401(a)(4) or 410 of the Code.  Contributions
      attributable to salary reduction that are made to a Key
      Employee's 401(k) Account shall be taken into account in
      determining the minimum required contribution under this
      Subsection (B).

(C)   If the Plan is a Top Heavy Plan for any Plan Year, and the
      Employer has elected vesting Schedule 3 under Article VI, the
      vested interest of each Member, who is credited with at least
      one Hour of Employment on or after the Plan becomes a Top
      Heavy Plan, in the Units allocated to his Account and subject
      to vesting Schedule 3 shall not be less than the percentage
      determined in accordance with the following schedule:

                        Completed                    Vested
                   Years of Employment             Percentage
                   -------------------             ----------
                   Less than 2                        0%
                   2 but less than 3                 20%
                   3 but less than 4                 40%
                   4 but less than 5                 60%
                   5 or more                        100%

(D)   (1)  For each Plan Year that the Plan is a Top Heavy Plan,
           1.0 shall be substituted for 1.25 as the multiplicand
           of the dollar limitation in determining the denominator
           of the defined benefit plan fraction and of the defined
           contribution plan fraction for purposes of Section
           415(e) of the Code.

      (2)  If, after substituting "90%" for "60%" wherever the
           latter appears in Section 416(g) of the Code, the Plan
           is not determined to be a Top Heavy Plan, the
           provisions of Subparagraph (1) of this Paragraph (D)
           shall not be applicable if the minimum Employer
           contribution allocable to any Member who is a Non-Key
           Employee as specified in Paragraph (B) of this Section
           is determined by substituting "4%" for "3%."

(E)   The Board shall, to the maximum extent permitted by the Code
      and in accordance with the IRS Regulations, apply the
      provisions of this Section 2 by taking into account the
      benefits payable and the contributions made under the
      Financial Institutions Retirement Fund or any other qualified
      plan maintained by an Employer, to prevent inappropriate
      omissions or required duplication of minimum contributions.

Section 3.  Information and Communications.

                                       -63-
<PAGE>

Each Employer, Member, Spouse and Beneficiary shall be required to furnish the
Board with such information and data as may be considered necessary by the
Board.  All notices, instructions and other communications with respect to the
Plan shall be in such form as is prescribed from time to time by the Board,
shall be mailed by first class mail or delivered personally, and shall be
deemed to have been duly given and delivered only upon actual receipt thereof
by the Board.  All information and data submitted by an Employer or a Member,
including a Member's birth date, marital status, salary and circumstances of
his employment and termination thereof, may be accepted and relied upon by the
Board.  All communications from the Board or the Trustee to an Employer,
Member, Spouse or Beneficiary shall be deemed to have been duly given if
mailed by first class mail to the address of such person as last shown on the
records of the Plan.

Section 4.  Small Account Balances.

Notwithstanding the foregoing provisions of the Plan, and except as provided
in Article III, Section 6(B)(6), if the value of all of a Member's Account
under the Plan (including a Profit Sharing Account and a Rollover Account, if
any), when aggregated is equal to or exceeds $500, then no Account will be
distributed without the consent of the Member prior to age 65 (at the
earliest).

Section 5.  Amounts Payable to Incompetents, Minors or Estates.

If the Board shall find that any person to whom any amount is payable under
the Plan is unable to care for his affairs because of illness or accident, or
is a minor, or has died, then any payment due him or his estate (unless a
prior claim therefor has been made by a duly appointed legal representative)
may be paid to his Spouse, relative or any other person deemed by the Board to
be a proper recipient on behalf of such person otherwise entitled to payment.
Any such payment shall be a complete discharge of the liability of the Trust
Fund therefor.

Section 6.  Non-alienation of Amounts Payable.

Except insofar as may otherwise be required by applicable law, or Article
VIII, or pursuant to the terms of a Qualified Domestic Relations Order, no
amount payable under the Plan shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment,
charge or encumbrance of any kind, and any attempt to so alienate shall be
void; nor shall the Trust Fund in any manner be liable for or subject to the
debts or liabilities of any person entitled to any such amount payable; and
further, if for any reason any amount payable under the Plan would not devolve
upon such person entitled thereto, then the Board, in its discretion, may
terminate his interest and hold or apply such amount for the benefit of such
person or his dependents as it may deem proper.  For the purposes of the Plan,
a "Qualified Domestic Relations Order" means any

                                       -64-
<PAGE>

judgment, decree or order (including approval of a property settlement
agreement) which has been determined by the Board in accordance with
procedures established under the Plan, to constitute a Qualified Domestic
Relations Order within the meaning of Section 414(p)(1) of the Code.  No
amounts may be withdrawn under Article VII and Article III, Section 8, and no
loans granted under Article VIII, if the Thrift Plan Office has received a
document which may be determined following its receipt to be a Qualified
Domestic Relations Order prior to completion of review of such order by the
Office within the time period prescribed for such review by the IRS
Regulations.

Section 7.  Unclaimed Amounts Payable.

If the Board cannot ascertain the whereabouts of any person to whom an amount
is payable under the Plan, and if, after 5 years from the date such payment is
due, a notice of such payment due is mailed to the address of such person, as
last shown on the records of the Plan, and within 3 months after such mailing
such person has not filed with the Board written claim therefor, the Board may
direct in accordance with ERISA that the payment (including the amount
allocable to the Member's contributions) be cancelled, and used in abatement
of the Plan's administrative expenses, provided that appropriate provision is
made for recrediting the payment if such person subsequently makes a claim
therefor.

Section 8.  Leaves of Absence.

(A)   Contribution allocations and vesting service continue to the
      extent provided in Paragraphs (B)(1), (2), (3) or (4), below,
      during any approved Leave of Absence, provided that the
      Employer notifies the Plan of its intention to grant to a
      specific Employee or Member, pursuant to the Employer's
      policy which is uniformly applicable to all its Employees
      under similar circumstances, one of the Leaves of Absence
      described in Paragraph (B) below, and agrees to notify the
      Plan at the conclusion of such leave.

(B)   For purposes of the Plan there are only four types of
      approved Leaves of Absence:

      (1)  Non-military leave granted to a Member for a period not
           in excess of one year during which service is
           recognized for vesting purposes and the Member is
           entitled to share in any supplemental contributions
           under Article III, Section 3 or forfeitures under
           Article VI, Section 2, if any, on a pro-rata basis,
           determined by the Salary earned during the Plan Year or
           Contribution Determination Period; or

      (2)  Non-military leave or layoff granted to a Member for a
           period not in excess of one year during which service
           is recognized for vesting purposes, but the Member is
           not entitled to share in any contributions or forfeitures as

                                       -65-
<PAGE>

           defined under (1) above, if any, during the period of the
           leave; or

      (3)  To the extent not otherwise required by applicable law,
           military or other governmental service leave granted to
           a Member from which he returns directly to the service
           of the Employer.  Under this leave, a Member may not
           share in any contributions or forfeitures as defined
           under (1) above, if any, during the period of the
           leave, but vesting service will continue to accrue; or

      (4)  To the extent not otherwise required by applicable law,
           a military leave granted at the option of the Employer
           to a Member who is subject to military service pursuant
           to an involuntary call-up in the Reserves of the U.S.
           Armed Services from which he returns to the service of
           the Employer within 90 days of his discharge from such
           military service.  Under this leave, a Member is
           entitled to share in any contributions or forfeitures
           as defined under (1) above, if any, and vesting service
           will continue to accrue.  Notwithstanding any provision
           of the Plan to the contrary, if a Member has one or
           more loans outstanding at the time of this leave,
           repayments on such loan(s) may be suspended, if the
           Member so elects, until such time as the Member returns
           to the service of the Employer or the end of the leave,
           if earlier.

Section 9.  Return of Contributions to Employer.

(A)   In the case of a contribution that is made by an Employer by
      reason of a mistake of fact, such Employer may request the
      return to it of such contribution within one year after the
      payment of the contribution, provided such refund is made
      within one year after the payment of the contribution.

(B)   In the case of a contribution made by an Employer or a
      contribution otherwise deemed to be an Employer contribution
      under the Code, such contribution shall be conditioned upon
      the deductibility of the contribution by the Employer under
      Section 404 of the Code.  To the extent the deduction for
      such contribution is disallowed, in accordance with IRS
      Regulations, the Employer may request the return to it of
      such contribution within one year after the disallowance of
      the deduction.

Section 10.  Controlling Law.

The Plan and all rights thereunder shall be governed by and construed in
accordance with the laws of the State of New York and ERISA.

                                       -66-
<PAGE>

             ARTICLE XI TERMINATION OF EMPLOYER PARTICIPATION

Section 1.  Termination by Employer.

Any Employer may terminate its participation in the Plan by giving the Board
written notice specifying a termination date which shall be a Valuation Date
at least 60 days subsequent to the date such notice is received by the Board.

Section 2.  Termination by Board.

The Board may terminate any Employer's participation, as of a termination date
specified by the Board, if the Board determines that the Employer has failed
to make proper contributions or to comply with any other provision of the Plan
or any applicable rulings or Regulations under the Code, within 15 days after
notice and demand by the Board.  Except as provided under Article III, Section
3, upon complete discontinuance of an Employer's contributions, its
participation shall automatically terminate, and its termination date shall be
a Valuation Date specified by the Board which is within 3 months subsequent to
the last day through which the Employer's contributions to the Trust Fund were
paid.

Section 3.  Termination Distribution.

If an Employer's participation is terminated, the Board shall promptly notify
the IRS and such other appropriate governmental authority as applicable law
may require.  Neither the Employer not its Employees shall make any further
contributions under the Plan after the termination date, except that the
Employer shall remit to the Board an amount equal to the product of (i) $30
multiplied by (ii) the number of the Employer's Members and Employees with a
balance in their Accounts as of the termination date, to defray the cost of
implementing its termination.  If the Employer elects to permit transfers to a
qualified successor plan in accordance with Article VII, Section 3, the
Employer shall remit to the Board an additional amount equal to the product of
(i) $30 multiplied by (ii) the number of its Members and Employees with a
balance in their Accounts actually electing to transfer their assets, to
defray the cost of such transfer transaction.  Except as Article III, Section
4 may provide, each Employee may thereafter withdraw the current value of his
Accounts in accordance with Article VII.  Subject to the provisions of Article
XII, Paragraph (D), an Employer whose participation has been terminated
pursuant to this Article may transfer assets under its prior Plan to a
qualified successor plan, provided such plan satisfies the requirements
contained in Article VII, Section 3 and the transfer is otherwise in
accordance with the procedures of such Section.

With respect to the transfer of the amounts which are held in Investment Funds
A and C and which are attributable to the terminating

                                       -67-
<PAGE>

Employer, such transfer shall, subject to the provisions of Article VII,
Sections 1 and 3, be made in cash.

With respect to the transfer of the amounts which are held in Investment Fund
B and which are attributable to a terminating Employer which has established a
qualified successor plan, the "Investment Fiduciary" (i.e., the Thrift Plan,
or alternatively, the Investment Manager of Fund B) shall determine whether
the Employer shall be offered to have transferred to its successor plan such
amounts in the form of new investment contracts (the "New Contracts") or,
alternatively, whether the transfer from Investment Fund B shall be made in
cash.

If such amounts are determined to be offered in the form of New Contracts by
the Investment Fiduciary, the Investment Fiduciary reserves the right to
designate for acceptance by the Employer one or more such New Contracts to be
issued by one or more of the issuers of the investment contracts then held
under Investment Fund B (the "Issuers").  If the Investment Fiduciary
designates more than one such New Contract, the Employer, in its acceptance of
the transfer of the New Contracts to its successor plan, must accept all such
New Contracts designated by the Investment Fiduciary.

If all of the New Contracts designated by the Investment Fiduciary are not
accepted by the terminating Employer or, alternatively, the Investment
Fiduciary determines that the transfer from Investment Fund B shall be made in
cash and a cash transfer is not accepted by the terminating Employer, funds
attributable to such Employer's participation under the Plan shall continue to
be maintained under the Issuers' contracts in Investment Fund B under the
Thrift Plan with no future right of the Employer to request a transfer under
the provisions of this Section, provided that the Members who are Employees of
such Employer may obtain distributions of benefits from the Plan in accordance
with the provisions of Article VII, Sections 1 and 3.

If the New Contracts are accepted by the terminating Employer, the Investment
Fiduciary will, as of the transfer date specified by the Thrift Plan, instruct
the Issuers to allocate to such New Contracts the asset values attributable to
those Members electing to transfer their Fund Account balances to the
Employer's qualified successor plan, thereby establishing such New Contracts
for the Employer.  Such New Contracts may consist of terms substantially
similar to the terms then in effect of the investment contracts held under
Investment Fund B on the later of the date of termination or the Valuation
Date as of which the transfer will occur, provided that the provisions of the
qualified successor plan are substantially similar to the provisions of the
Thrift Plan as determined by the Issuers.

Notwithstanding any other provision of this Section, the asset values
allocated to such New Contracts shall in no case exceed in the aggregate an
amount equal to the amount of all funds attributable to

                                       -68-
<PAGE>

 such Employer, which are subject to such a transfer to a qualified successor
plan of the Employer in accordance with the procedures of Article VII, Section
3(A), under all investment contracts held under Investment Fund B under the
Plan.

Upon the termination of participation under the Plan of an Employee's or
Member's Employer, any rights of the Employee or Member to make contributions,
rollovers or transfers to the Plan shall cease.

                                       -69-
<PAGE>

        ARTICLE XII  AMENDMENT OR TERMINATION OF THE PLAN AND TRUST

(A)   The Board shall have the right to amend or terminate the Plan
      or Trust Agreement at any time in whole or in part, for any
      reason, and without the consent of any Employer, Member or
      Beneficiary, and each Employer by its adoption of the Plan
      and Trust shall be deemed to have delegated this authority to
      the Board.  No amendment, however, shall impair such rights
      of payment as the Member or his Beneficiary would have had,
      if such amendment had not been made, with respect to
      contributions made by him or on his behalf prior to such
      amendment, except to the extent that such amendment is, in
      the opinion of the Board, necessary or desirable to qualify
      or maintain the Plan and the Trust as a plan and trust
      meeting the requirements of Sections 401(a) and 501(a) of the
      Code as now in effect or hereafter amended, or any other
      applicable section of the Code now or hereafter in force from
      time to time; and no amendment shall make it possible for any
      part of the Trust Fund (other than such part as may be
      necessary to pay the expenses and charges referred to in
      Article IX) to be used for purposes other than for the
      exclusive benefit of Members or their Beneficiaries.

(B)   In the event of termination of the Plan by the Board or upon
      a complete discontinuance of contributions under the Plan,
      the Units credited to each Member's Account as of the date of
      such termination or complete discontinuance of contributions
      shall be fully vested in the Member, and the Trustee shall
      upon direction of the Board liquidate the assets of the Trust
      Fund with such promptness as the Trustee deems prudent.  When
      such liquidation has been completed and after provision for
      all expenses and charges referred to in Article IX, and
      proportionate adjustment of all Plan Accounts to reflect such
      expenses, the Trustee shall pay to each person who was a
      Member on such termination date (or in the event of his death
      on or after such date, to his Spouse or Beneficiary) a lump
      sum equal to the amount, if any, then credited to his Account
      after such liquidation and provision for expenses and
      charges.

(C)   Notwithstanding any termination of the Plan by the Board, the
      Board shall remain in existence and all the provisions of the
      Plan shall remain in force which are necessary for the
      execution of the Plan and the distribution of the Trust Fund
      assets in accordance with this Article.

(D)   No assets of the Plan shall in any event be merged,
      consolidated with, or transferred to any other plan unless
      each Member affected thereby would, if such plan then
      terminated immediately after such event, receive thereunder a
      benefit which is equal to or greater than the benefit to
      which he would have been entitled if the Plan had terminated
      immediately before such event.

                                       -70-
<PAGE>

(E)   In the event that any governmental authority or the Board
      determines that a partial termination (within the meaning of
      ERISA) of the Plan has occurred as to any Employer, then the
      Units credited to the Account of each Member who is affected
      thereby shall be fully vested in such Member and the
      provisions of Article XI and this Article XII, which in the
      opinion of the Board are necessary for the execution of the
      Plan and the allocation and distribution of assets of the
      Plan, shall apply.

                                       -71-
<PAGE>

                     TRUSTS ESTABLISHED UNDER THE PLAN

      Assets of the Plan are held in trust under Trust Agreements with Bankers
Trust Company, New York, NY, and Republic National Bank of New York, N.A.,
pursuant to Article IX, Section 2 of the Plan.  Any Employer or Member may
obtain a copy of these Trust Agreements from the office of the Plan.

                                       -72-
<PAGE>

                                APPENDIX A

      The Plan, as set forth herein, constitutes a restatement of the Plan
with amendments effective through July 1, 1993.  Although this restatement is
generally effective July 1, 1993, the inclusion of amendments to conform with
the Tax Reform Act of 1986 and other applicable laws necessitates different
effective dates for certain provisions of the Plan.  Accordingly,
notwithstanding the general effective date of this restatement, various
provisions shall be effective as expressly provided under the Plan and the
following sections, as amended, shall be effective as indicated below:

                Sections                         Effective
                --------                         ---------
      Art. X, Section 2(A)(1)                 July 18, 1984

      Art. VII, Section 5(B)                  January 1, 1985

      Art. I, Paragraph 14; Art. X            January 1, 1987
      Sections 1, 2(A)(4) & (5)

      Art. I, Paragraphs 4, 9, 24, & 32;      January 1, 1988
      Art. II, Section 2; Art. III,
      Section 1, Section 2(A) (the first
      sentence), Section 3; Art. IV
      (fifth paragraph); Art. V (the first
      paragraph); Art. VI; Art. VII,
      Sections 2, 3(A) and 5; Art. VIII,
      Section 1 (after the proviso);
      Art. X, Sections 2(C), 4, 8,
      9 and 10.

      Art. I, Paragraph 10                    July 1, 1988

      Art. VIII, Sections 2 through 7         October 18, 1989
      (except clause (a) of the second
      sentence of Section 3 which shall
      be effective January 1, 1989)

      Art. III, Section 3                     January 1, 1990



64106.1

                                       -73-
<PAGE>

                                Exhibit 13

                       Annual Report to Stockholders

<PAGE>







                                 1999 ANNUAL REPORT



                            EMPIRE FEDERAL BANCORP, INC.

<PAGE>

                              TABLE OF CONTENTS

                                                              Page

          Letter to Stockholders..........................      1
          Selected Consolidated Financial Information.....      2
          Management's Discussion and Analysis of
          Financial Condition and Results of Operations...      5
          Independent Auditors' Report....................     16
          Consolidated Financial Statements...............     17
          Notes to Consolidated Financial Statements......     21
          Common Stock Information . . . . . . . .             43
          Directors and Officers . . . . . . . . .             44
          Corporate Information. . . . . . . . . .             45

                               -------------
                           BUSINESS OF THE COMPANY

     Empire Federal Bancorp, Inc. (the "Corporation") is a savings and loan
holding company headquartered in Livingston, Montana.  Its principal
subsidiary is Empire Federal Savings Bank (the "Bank") (the Corporation and
the Bank shall at times be referred to as the "Corporation") which operates
three branches in south-central Montana.  The Corporation was incorporated on
September 20, 1996, for the purpose of becoming the holding company for the
Bank, upon its conversion from a federal mutual savings and loan association
to a federal stock association.  As part of the conversion process the
association's name was changed from "Empire Federal Savings and Loan
Association" to "Empire Federal Savings Bank".  The sale of stock by the
Corporation was completed and the conversion process finished on January 23,
1998.  The financial and other information contained in this Annual Report are
presented as if the conversion had been completed on December 31, 1996.  On
December 31, 1999, the Corporation had total assets of $114.5 million, total
deposits of $71.4 million, and stockholders' equity of $32.8 million.  The
Corporation's principal activity is holding the stock of the Bank.
Accordingly, the information set forth in this report, including the
consolidated financial statements and related notes, relates primarily to the
Bank.

     The Bank was organized under the statutes of the State of Montana as
Empire Federal Building and Loan Association (the "Association"), and was
authorized to begin business on May 25, 1923.  The Association was granted
membership in the Federal Home Loan Bank System on March 3, 1933, and obtained
insurance of accounts from the Federal Savings and Loan Insurance Corporation
on August 12, 1937.  At a meeting held August 11, 1952, members of the
Association voted a name change to Empire Savings and Loan Association to keep
in step with modern terminology for the business.  On January 5, 1959, the
Association merged with the Pioneer Building and Loan Association of Bozeman
and continued the services of  Pioneer to the Bozeman community.  On June 25,
1970, the state-chartered Association converted to a federal charter and
changed its name to Empire Federal Savings and Loan Association.  On September
30, 1980, Empire Federal Savings merged with  Big Timber Building and Loan
Association and opened its doors to business in Big Timber.  During 1999 the
Bank received approval to open a de novo branch in Billings, Montana.  This
branch is expected to open in April 2000.

     In 1985 the Bank formed a service corporation, Dime Service Corporation
("Dime") and purchased the book of insurance of United Agencies in Livingston,
and began operation as Dime Insurance Agency, an independent insurance agency,
with offices in Livingston, Bozeman and Big Timber, Montana.

     The Bank is a community oriented financial institution which obtains
funds primarily through savings and checking deposits from  the general
public, from repayment of loans, and from borrowings and retained earnings.
These funds are used primarily to originate commercial, business, commercial
real estate, residential and consumer loans .  The Bank also makes home equity
loans for a wide variety of purposes, finances other types of real estate, and
invests in obligations of the U. S. Government and its agencies.

<PAGE>

                       [Empire Federal Bancorp Letterhead]

To Our Shareholders:

      1999 was a year of transition for Empire Federal Bancorp, Inc. and its
subsidiary, Empire Federal Savings Bank.  Our efforts to
become a full service community bank are beginning to show results and should
serve the shareholders well in future years.

      Beverly D. Harris retired on December 31, 1999.  Beverly had been with
the company for more than 43 years, and served as President and CEO for 26
years.  During 1999 Beverly served as Vice Chairman of both companies and will
remain on the Board of Directors.  We thank Beverly for her leadership, hard
work and loyalty to the organization and wish her the best in her retirement
years.

      During 1999 the Bank applied for and received permission from the Office
of Thrift Supervision to establish a full service branch in Billings, Montana.
Construction is near completion and the Billings office will be operational on
April 3, 2000.  Billings is the largest city in Montana and is a major
regional commercial, retail and medical center.  Heading up the management
team in Billings will be Pete Cochran and Cathy Hanser.  Both are long term
Billings bankers with combined experience of over 40 years in the Billings
market.  The new branch will emphasize the Bank's historical role in mortgage
lending, but will also offer a full line of commercial, small business and
retail lending.

      Net income for 1999 was up slightly at $1,265,000.  Earnings per share
were at $0.70 compared to $0.56 in 1998.  ($0.68 in 1998 excluding the effect
of accelerated vesting of MRDP shares).  Net interest income declined by
$245,000 for the year ended December 31, 1999 as compared to the same period
in 1998 partially due to the payment for treasury shares in late 1998 and
early 1999.  This loss of investable funds was offset during the year ended
December 31, 1999 through growth of deposits which were invested in loans.  In
addition, the overall yield on interest earning assets decreased from 7.25%
for the year ended December 31, 1998 to 7.16% for the same period in 1999.
Our return on average assets during 1999 was 1.15%.

      Loans outstanding increased by $10.1 million or 20.3% during 1999.  In
an effort to reduce our interest rate risk, most of our loan growth was in
loans with maturities of five years or less and floating rate commercial and
consumer loans.  We will continue to portfolio some residential real estate,
but will become much more active in the year 2000 in selling fixed rate
mortgages.

      Deposits increased $4.9 million or 7.4% for the year.  This growth is a
direct result of a more competitive money market account, and an increased
effort to solicit depository relationships from existing customers, commercial
business, and new loan customers.  1999 was the first year since prior to 1994
that the company had any significant deposit growth.

      Asset quality remains strong, and at year-end December 31, 1999 the Bank
had one non-accrual loan amounting to $14,000.  Nine loans were delinquent
over 30 days amounting to $775,000 of which one loan amounting to $10,000 was
delinquent over 90 days.  The Bank has no real estate acquired through
foreclosure.

      The Bank successfully completed the year-end closings and all computer
systems were totally operable following January 1, 2000.  While there are no
disruptions of any services provided to our customers, management will
continue to monitor all data processing applications into the year 2000 until
complete satisfaction is obtained.

      We continue to have an extremely well capitalized institution and are
putting forth every effort to better implement the usage of our excess
capital.  We will continue to buy back stock during the year 2000 as economic
conditions allow.  Our internal rate of growth should remain strong, and we
are optimistic that Billings will add significantly to our loan and deposit
growth.  We continue to look for acquisitions that are compatible to our
organization and beneficial to our shareholders, and I am, again, optimistic
that we can accomplish something in this area during the year 2000.

      During 1999 we made great strides in becoming a full service community
banking company.  We have a highly capable staff which we have strengthened in
1999.   Our technology support is strong, and we have added to it during the
year.  We are putting more emphasis in training our staff to better utilize
our technology both in delivering our traditional products plus the many new
products we have added during the year 1999.  We have leadership that is
experienced in the direction we are heading, and I look forward with
confidence to the challenges and opportunities that lie ahead.  We will
continue on a course that will utilize our strong capital base to expand our
franchise and increase long-term shareholder value.

Sincerely,

/s/ William H. Ruegamer

William H. Ruegamer
President & CEO

                                       1
<PAGE>

                 SELECTED CONSOLIDATED FINANCIAL INFORMATION

     The following tables set forth certain information concerning the
consolidated financial position and results of operation of the Corporation at
the dates and for the periods indicated.  This information is qualified in its
entirety by reference to the detailed information and Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Annual Report.  The
Corporation changed its fiscal year end from June 30 to December 31 in
connection with the Conversion.

                                 At December 31,               At June 30,
                     --------------------------------------  -----------------
                       1999      1998      1997      1996      1996     1995
                       ----      ----      ----      ----      ----     ----
                                               (In Thousands)

SELECTED FINANCIAL
 CONDITION DATA:

Total assets.......  $114,527  $109,201  $109,801  $115,874  $86,810  $85,495
Cash and interest-
 bearing deposits..     2,372     5,154     2,904    30,990    2,499    2,196
Investment and
 mortgage-backed
 securities avail-
 able-for-sale.....    41,090    39,866    36,496    13,768   13,877    1,192
Investment and
 mortgage-backed
 securities held-
 to-maturity.......     6,406    10,498    20,556    26,188   25,196   39,441
Loans receivable,
 net...............    59,570    49,499    45,714    41,704   41,882   39,432
Deposits...........    71,353    66,413    66,859    67,698   68,548   67,064
Advances from FHLB.     8,800     4,000        --        --    1,500    1,751
Total equity,
 substantially
 restricted........    32,755    36,301    40,598    39,610   15,876   15,500


                                  Year             Six Months       Year
                                 Ended               Ended          Ended
                              December 31,        December 31,     June 30,
                      --------------------------- ------------ --------------
                       1999      1998      1997      1996      1996     1995
                       ----      ----      ----      ----      ----     ----
                                               (In Thousands)

SELECTED OPERATING DATA:

Interest income....    $7,592    $7,665    $7,709    $3,230   $6,304   $6,305
Interest expense...     3,208     3,036     3,118     1,626    3,310    2,938
                       ------    ------    ------    ------   ------   ------
  Net interest income   4,384     4,629     4,591     1,604    2,994    3,367
Provision for
 loan losses.......        18        20        20        --       55       --
  Net interest income  ------    ------    ------    ------    -----    -----
   after provision for
   loan losses.....     4,366     4,609     4,571     1,604    2,939    3,367
Non-interest income:    -----     -----     -----     -----    -----    -----
  Insurance commission
   income..........       576       624       652       336      688      691
  Customer service
   charges.........       228       216       188        86      145     130
  Other income.....        24        32        19        17       45      36
  Total non-interest     ----      ----      ----      ----     ----    ----
   income..........       829       872       859       439      878     857
                         (table continued on following page)

                                       2
<PAGE>


                                  Year             Six Months       Year
                                 Ended               Ended          Ended
                              December 31,        December 31,     June 30,
                      --------------------------- ------------ --------------
                       1999      1998      1997      1996      1996     1995
                       ----      ----      ----      ----      ----     ----
                                               (In Thousands)

Non-interest expense:
  Compensation and
   benefits........     1,839     2,156     1,621       807    1,615    1,542
  Occupancy and
   equipment.......       409       378       363       171      340      264
  Deposit insurance
   premiums.               65        72        78        56      185      226
  SAIF special
   assessment......        --        --        --       451       --       --
  Other general
  and administrative      809       729       750       355      646      651
  Provision for losses
  on real estate owned     --        --        --        --        --      --
                       ------    ------    ------    ------   ------   ------
     Total non-interest
      expense......     3,122     3,335     2,812     1,840    2,786    2,683
                       ------    ------    ------    ------   ------   ------
    Income before
     income taxes..     2,073      2146     2,618       203    1,031    1,541
Income tax expense.       808       901     1,032        61      399      589
                       ------    ------    ------    ------   ------   ------
Net income.........    $1,265    $1,245    $1,586     $ 142   $  632      952
                       ======    ======    ======     =====   ======    =====

                                At or For the     At or For the
                                   Year           Six Months    At or For the
                                   Ended           Ended         Year Ended
                                 December 31,      December 31,     June 30,
                               ---------------   ---------------  -----------
                               1999  1998  1997       1996        1996   1995
                               ----  ----  ----       ----        ----   ----
SELECTED FINANCIAL RATIOS(1):
Performance Ratios:
Return on average assets
(net income divided by
 average assets)(2).......    1.15%   1.15%  1.43%   0.32%       0.72%  1.12%
Return on average equity
 (net income divided by
 average equity)(2).......    3.85    3.26   3.95    1.74        3.99   6.33
Dividend payout ratio
(dividends declared
 per share divided by
 net income per share)....   57.14   57.14  33.58      --          --     --
Average interest-earning
 assets  to average
interest-bearing
 liabilities..............  142.55  154.90 155.55  121.86      119.33 118.48
Net interest income
 after provision for
 loan losses to total
 non-interest expense(2)..  139.85  138.19 162.55   87.21      105.49 125.49
Interest rate spread......    2.85    2.82   2.66    2.90        2.80   3.33
Net yield on average
 interest-earning
 assets...................    4.14    4.40   4.28    3.72        3.57   3.97
Efficiency ratio
 (non-interest
 expense divided by the
 sum of net interest
 income and non-interest
 income)(1)...............   59.89   60.63  51.59   90.05       71.95  63.52
             (table continued on, and footnotes on, following page)

                                      3
<PAGE>


                               At or For the   At or For the   At or for the
                                   Year          Six Months        Year
                                   Ended           Ended           Ended
                                December 31,    December 31,     June 30,
                               -------------   -------------   -------------
                               1999     1998   1997     1996   1996    1995
                               ----     ----   ----     ----   ----    -----

Equity Ratios:
Average equity to average
 assets  (average equity
 divided by average
 total assets)............    29.95    35.27  36.32    18.19  18.11   17.07
Equity to assets at
year end.                     28.60    33.24  36.97    34.18  18.29   18.13
Asset Quality Ratios:
Non-performing assets to
 total assets.............    (3)         --     --       --     --      --
Non-performing loans
 to total assets..........    (3)         --     --       --     --      --
Non-performing loans
 to net loans..............   (3)         --     --       --     --      --
Allowance for loan losses,
 real estate owned
 and other repossessed
 assets to non-performing
 assets....................   (3)          *      *        *      *       *
Allowance for loan
 losses to total
 loans outstanding.........    0.38     0.44   0.41     0.46   0.46    0.36



                                       At              At
                                   December 31,    December 31,   At June 30,
                                -----------------  ------------  ------------
                                1999  1998   1997     1996       1996    1995
                                ----  ----   ----     ----       ----    ----
OTHER DATA:

Number of:
 Real estate loans
  outstanding..............      732    702    714     731         744    765
 Deposit accounts..........   10,029 10,078 10,368  10,598      10,632 10,623
 Full-service offices......        3      3      3       3           3      3


*    Not meaningful.
(1)  Annualized, where appropriate, for the six months ended December 31,
     1996.
(2)  Includes special SAIF assessment of $451,000 for the six months ended
     December 31, 1996.
(3)  One loan for $14,000 on non-accrual at December 31, 1999.  Percentages
     not meaningful.

                                       4
<PAGE>


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

Special Note Regarding Forward-Looking Statements

     The Corporation may from time to time make written or oral "forward-
looking statements", including statements contained in the Corporation's
fillings with the Securities and Exchange Commission (including this Annual
Report on Form 10-KSB and the exhibits thereto), in its reports to
stockholders and in other communications by the Corporation, which are made in
good faith by the Corporation pursuant to the "safe harbor" provision of the
Private Securities Litigation Reform Act of 1995.

     These forward-looking statements involve risks and uncertainties, such as
statements of the Corporation's plans, objectives, expectations, estimates and
intentions, that are subject to change based of various important factors
(some of which are beyond the Corporation's control).  The following factors,
among others, could cause the Corporation's financial performance to differ
materially from the plans, objectives, expectations, estimates and intentions
expressed in such forward-looking statements:  the strength of the United
States economy in general and the strength of the local economy in which the
Corporation conducts operations; the effects of, and changes in, trade,
monetary and fiscal policies and laws, including interest rate policies of the
board of governors of the federal reserve system, inflation, interest rates,
market and monetary fluctuations; the timely development of and acceptance of
new products and services of the Corporation and the perceived overall value
of these products and services by users, including the features, pricing and
quality compared to competitors' products and services;  the willingness of
users to substitute competitors' products and services for the Corporation's
products and services; the success of the Corporation in gaining regulatory
approval of its products and services, when required; the impact of changes in
financial services; laws and regulations (including laws concerning taxes,
banking, securities and insurance); technological changes; acquisitions;
changes in consumer spending and savings habits; and the success of the
Corporation at managing the risks resulting from these factors.

     The Corporation cautions that the listed factors are not exclusive.  The
Corporation does not undertake to update any forward-looking statement,
whether written or oral, that may be made from time to time by or on behalf of
the Corporation.

General

     Management's discussion and analysis of financial condition and results
of operations is intended to assist in understanding the financial condition
and results of operations of the Corporation.  The information contained in
this section should be read in conjunction with the Consolidated Financial
Statements and accompanying Notes thereto contained herein.

Operating Strategy

     The business of the Bank consists principally of attracting deposits from
the general public and using such deposits to originate commercial, commercial
real estate, residential, and consumer loans primarily in its market areas in
Montana.  The Bank also invests in interest-bearing deposits, investment grade
federal agency securities and mortgage-backed securities.  The Bank plans to
continue to fund its assets primarily with deposits, although FHLB advances
have been used as a supplemental source of funds.

     The Bank's profitability depends primarily on its net interest income,
which is the difference between the income it receives on its loan and
investment portfolio and its cost of funds, which consists of interest paid on
deposits and FHLB advances.  Net interest income is also affected by the
relative amounts of interest-earning assets and interest-bearing liabilities.
When interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.  The Bank's
profitability is also affected by the level of other income and expenses.
Other income consists of service charges on checking and  NOW accounts and
other fees, and insurance commissions.  Other expenses include compensation
and employee benefits, occupancy expenses, deposit insurance premiums,
equipment and data servicing expenses, professional fees and other operating
costs.  The Bank's results of operations are also significantly affected by
general economic and competitive

                                       5
<PAGE>

conditions, particularly changes in market interest rates, government
legislation and policies concerning monetary and fiscal affairs, housing and
financial institutions and the attendant actions of the regulatory
authorities.

     The Bank's strategy is to operate as a conservative, well-capitalized,
profitable institution dedicated to offering a full line of community banking
services and to  providing quality service to all customers.  The Bank
believes that it has successfully implemented its strategy by (i) maintaining
strong capital levels, (ii) maintaining effective control over operating
expenses to attempt to achieve profitability under differing interest rate
scenarios, (iii) emphasizing local loan originations, and (iv) emphasizing
high-quality customer service with a competitive fee structure.

Year 2000 Issues

     The Bank places significant reliance on computers to process information
necessary to conduct its business.  During the past few years industry and
regulatory agencies advised the business community that some computers may not
be able to interpret certain information related to the year 2000.  The Bank
successfully completed the year-end closings and all computer systems were
totally operable following January 1, 2000, and management did not identify
any errors or experience any computer malfunctions.   The major financial
impact related to the Year 2000 issue was the replacement of teller hardware
and software.  The cost of conversion and retraining amounted to $225,000. The
Bank has not been informed of any such problem experienced by its vendors or
its customers.

     While there were no disruptions of any services provided to our
customers, management will continue to monitor all data processing
applications into the Year 2000.  Management does not believe at this time
that any potential problems will materially impact the ability of the Bank to
continue its operation, however, no assurance can be given that this will be
the case.

Financial Condition

     Consolidated assets increased by approximately $5.3 million, or 4.9%,
from $109.2 million at December 31, 1998, to $114.5 million at December 31,
1999.

     Except for the $1.3 million decrease in the market value of investments
and mortgage-backed securities available-for-sale, the consolidated balance
sheet was not materially affected by market conditions between December 31,
1998, and December 31, 1999.  Net maturities and payments of $4.1 million
reduced investment and mortgage-backed securities held-to-maturity from $10.5
million at December 31, 1998, to $6.4 million at December 31, 1999.  Net loans
increased $10.1 million or 20.3%.

     Deposits increased by $4.9 million from $66.4 million at December 31,
1998, to $71.4 million, or 7.4% at December 31, 1999.

     Premises and equipment increased by $720,000, or 33.6% from $2.1 million
at December 31, 1998, to $2.9 million at December 31, 1999, primarily as the
result of the purchase of property in Billings, Montana  for a new branch
facility.

     Stockholders' equity decreased from $36.3 million at December 31, 1998,
to $32.8 million at December 31, 1999.  The change is the result of net income
of $1.3 million, the release of Employee Stock Ownership Plan ("ESOP") shares
in the amount of $165,000 and an decrease of $1.3 million related to the
decrease in market value of securities available-for-sale.  In addition,
10,369 shares of the Management Recognition and Development Plan ("MRDP")
vested and unearned MRDP compensation was reduced by $184,000.  Stockholders'
equity was also decreased by the payments of $751,000 in dividends.  During
the year ended December 31, 1999, the Corporation repurchased 221,132 shares
of its common stock in the open market for an average price of $14.15 per
share for a total of $3.1 million.  There were 590,830 shares held in the
treasury at December 31, 1999, and 369,698 shares at December 31, 1998.

                                       6
<PAGE>

Asset Quality

     At December 31, 1999, the Bank had one nonaccrual loan amounting to
$14,000.  At December 31, 1999, the Bank had nine loans that were delinquent
over 30 days amounting to $775,000 of which one loan amounting to $10,000 was
delinquent over 90 days.  The Bank had no real estate acquired through
foreclosure at December 31, 1999.

Results of Operations

     The operating results of the Bank depend primarily on its net interest
income.  The Bank's net interest income is determined by its interest rate
spread, which is the difference between the yields earned on its
interest-earning assets and the rates paid on its interest-bearing liabilities
and the degree of mismatch in the maturity and repricing characteristics of
its interest-earning assets and interest-bearing liabilities.  The Bank's net
earnings are also affected by the establishment of provisions for loan losses
and the level of its other non-interest income, including insurance commission
income and deposit service charges, as well as its other expenses and income
tax provisions.

Comparison of Results of Operations for the Years Ended December 31, 1999 and
1998

     Net Income.  Net income increased by $21,000 to $1.3 million for the year
ended December 31, 1999, as compared to $1.2 million for the same period in
1998.  There are several factors related to the nominal increase in net
income.  Net income for the year ended December 31, 1998 included a $395,000
charge to compensation expense related to the accelerated vesting of shares
under the MRDP which was not a recurring event in 1999.  Net income for the
year ended December 31, 1999 included a decrease in net interest income,
increases in non-interest income and certain non-interest expenses which, on a
net basis, offset the non recurring charge incurred in 1998.  The following
narrative discusses in more detail the noted changes for the year ended
December 31, 1999.

     Net Interest Income.  Net interest income decreased by $245,000, or 5.3%,
to $4.4 million for the year ended December 31, 1999 from $4.6 million for the
same period in 1998.  The decrease in net interest income primarily reflected
an increase in average interest bearing liabilities of $6.5 million from $66.5
million for the year ended December 31, 1998 to $74.4 million for the same
period in 1999.   Average interest earning assets increased $895,000 from
$105.1 million for the year ended December 31, 1998 to $106.0 million for the
comparable period in 1999.  Interest rate spreads increased from 2.82% for the
year ended December 31, 1998 to 2.85% for the same period in 1999.

     Interest Income.  Total interest income decreased by $74,000, or 1.0%,
for the year ended December 31, 1999, as compared to the same period in 1998.
The decline was primarily attributable to a decrease in the average yield on
interest earning assets from 7.29% for the year ended December 31, 1998 to
7.16% for the same period in 1999 while overall average earning assets
increased by approximately $900,000.  This reduction in average yield reflects
a general decrease in interest rates on loans and investments for the
comparable periods.

     Interest Expense.  Total interest expense was $3.2 million for the year
ended December 31, 1999, as compared to $3.0 million the same period in 1998.

     Average interest bearing deposits for the year ended December 31, 1999,
amounted to $68.7 million as compared to $66.5 million for the same period in
1998.  Interest on deposits decreased $56,000 from the year ended December 31,
1998 as compared to the same period in 1999.  The decline in deposit interest
is primarily the result of a reduction in the average cost of  deposits from
4.42% to 4.20% for the year ended December 31, 1998 as compared to the same
period for 1999.

     Other interest expense of $324,000 for the year ended December 31, 1999
includes $267,000 related to borrowings from the FHLB and $56,000 associated
with the purchase of the main office building.  Other interest expense for the
comparable period in 1998 included $34,000 related to FHLB borrowings and
$61,000 associated with the purchase of the

                                       7
<PAGE>

main office building.  Average FHLB borrowings increased from $701,000 for the
year ended December 31, 1998 as compared to $5.1 million for the same period
in 1999.

     Provision for Loan Losses.  The provision for loan losses was
approximately $18,000 for the year ended December 31, 1999 and $20,000 for the
same period in 1998.  At the end of both years, the level of reserves was
deemed to be adequate by management.  Loan loss reserves as a percentage of
loans was .38% at December 31, 1999, and .44% at December 31, 1998.
Management's periodic evaluation of the adequacy of the allowance is based on
factors such as the Bank's past loan loss experience, known and inherent risks
in the portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral, current and prospective
economic conditions, peer group comparisons, and independent appraisals.  In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to provide additions to the allowance based
upon judgments different from management.  Assessment of the adequacy of the
allowance for credit losses involves subjective judgments regarding future
events, and thus, there can be no assurance that additional provisions for
credit losses will not be required in future periods. Although management uses
the best information available, future adjustments to the allowance may be
necessary due to economic, operating, regulatory and other conditions that may
be beyond the Bank's control.  Any increase or decrease in the provision for
loan losses has a corresponding negative or positive effect on net income.

     Non-Interest Income.  Non-interest income decreased $43,000 for the year
ended December 31, 1999, as compared to the same period in 1998 primarily as
the result of a decrease in commissions and profit sharing from insurance
companies of $49,000.

     Insurance commissions received from Dime are the largest component of
non-interest income.  Insurance commissions of $576,000 and $624,000 were
received for the years ended December 31, 1999, and 1998, respectively.  The
decrease in commission income resulted primarily from decreases in premiums
and commissions from key companies represented by Dime.  Increased competition
and possible future decreases in commissions will continue to impact Dime's
financial results.

      Non-Interest Expense.  Total non-interest expense decreased $213,000 or
6.4% from the year ended December 31, 1998, compared to the year ended
December 31, 1999.  Included in this decrease is a decrease in compensation
expense of $316,000 related to the previously mentioned $395,000 accelerated
vesting of the MRDP shares for the year ended December 31, 1998.  Offsettting
this decrease, compensation expense for the year ended December 31, 1999
includes approximately $40,000 in salaries and bonuses related to the
recruitment of the senior management team for the new branch office in
Billings.

      Other changes in non-interest expense include an increase in occupancy
expense of $30,000 caused primarily by additional depreciation expense related
to new teller equipment purchased in late 1998.  Other non-interest expense
increased from $622,000 for the year ended December 31, 1998 to $686,000 or
10.2% for the comparable period in 1999.  Included in this increase were
increases in legal and internal auditing costs and costs associated with the
new branch in Billings.

     Income Taxes.  Income taxes decreased $93,000 from the year ended
December 31, 1998, as compared to the same period in 1999 as the result of the
decrease in income before income taxes.  In addition, income tax expense for
the year ended December 31, 1998 was impacted by the non-deductibility of a
portion of the accelerated MRDP charge for that year.  The effective combined
federal and state tax rate was 39.0% and 42.0% for the years ended December
31, 1999 and 1998 respectively.

Comparison of Results of Operations for the Year Ended December 31, 1998 and
1997

     Net Income.  Net income was $1.2 million for the year ended December 31,
1998, as compared to $1.6 million for the same period in 1997.  The $341,000
decline in net income is caused primarily by the accelerated vesting of shares
awarded under the MRDP.  Under the terms of the MRDP, shares awarded are
vested and amortized to expense over a 60-

                                       8
<PAGE>

month period; however, upon the death of a participant, the vesting is
accelerated.  On September 5, 1998, the Chief Financial Officer of the
Corporation passed away, and 25,921 shares were released to the officer's
estate.  The accelerated vesting of deferred compensation amounted to $395,000
which was charged to compensation expense in September 1998.  Net income for
the year ending December 31, 1998,  would have been $1.5 million if the
accelerated vesting would not have occurred.

     Interest Income.  Total interest income increased by $43,000, or 0.6%,
for the year ended December 31, 1998, as compared to the same period in 1997.
The increase in interest on mortgage loans of $355,000 was attributable to the
increase in the average balance of loans outstanding from $44.1 million for
the year ended December 31, 1997, to $48.7 million for the year ended December
31, 1998.  This increase in volume was partially offset by a decrease in the
average yield from 8.44% for the year ended December 31, 1997, to 8.37% for
the same period in 1998.  Interest on mortgage-backed securities increased
$78,000 from $2.9 million for the year ended December 31, 1997, to $3.0
million for the comparable period in 1998 as a result of an increase in
average outstanding mortgage-backed securities of $721,000 and an increase in
the average yield from 6.57% to 6.64%.  Offsetting these increases were
decreases in interest on investment securities and other interest of $269,000
and $207,000, respectively.  These decreases are the result of the
reinvestment of maturing securities and interest bearing deposits in mortgage
loans and mortgage-backed securities, as previously noted.

     Interest Expense.  Total interest expense decreased by $82,000 for the
year ended December 31, 1998, as compared to the same period in 1997.  The
decrease was the result of a $80,000 decrease in interest on deposits and a
$2,000 decrease in other interest expense.

     Average deposits for the year ended December 31, 1998, amounted to $66.5
million as compared to $67.3 million for the same period in 1997.  The decline
in deposit interest is the result of this decline in average outstanding
deposits for the year ended December 31, 1998, and a reduction in the average
cost of deposits from 4.49% to 4.42% for the year ended December 31, 1997, as
compared to the same period for 1998.

     Other interest expense of $98,000 for the year ended December 31, 1997,
related primarily to the interest paid for stock over-subscription on the
stock issuance date of January 23, 1997.  Interest expense of $96,000 for the
comparable period in 1998 is related to the debt associated with the purchase
of the main office building and FHLB borrowings.

     Provision for Loan Losses.  The provision for loan losses was
approximately $20,000 for the years ended December 31, 1998 and 1997.  At the
end of both years, the level of reserves was deemed to be adequate by
management.  Loan loss reserves as a percentage of loans was .44% at December
31, 1998, and .41% at December 31, 1997. Management's periodic evaluation of
the adequacy of the allowance is based on factors such as the Bank's past loan
loss experience, known and inherent risks in the portfolio, adverse situations
that may affect the borrower's ability to repay, estimated value of any
underlying collateral, current and prospective economic conditions, peer group
comparisons, and independent appraisals.  In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the Bank's allowance for loan losses.  Such agencies may require the
Bank to provide additions to the allowance based upon judgments different from
management.  Assessment of the adequacy of the allowance for credit losses
involves subjective judgments regarding future events, and thus, there can be
no assurance that additional provisions for credit losses will not be required
in future periods. Although management uses the best information available,
future adjustments to the allowance may be necessary due to economic,
operating, regulatory and other conditions that may be beyond the Bank's
control.  Any increase or decrease in the provision for loan losses has a
corresponding negative or positive effect on net income.

     Non-Interest Income.  Non-interest income increased $13,000 for the year
ended December 31, 1998, as compared to the same period in 1997 primarily as
the result of a $41,000 increase in customer service charges and other
non-interest income, offset by a decrease in commissions and profit sharing
contingencies from insurance companies of $28,000.

     Insurance commissions received from Dime are the largest component of
non-interest income.  Insurance commissions of $624,000 and $652,000 were
received for the years ended December 31, 1998, and 1997, respectively.  The

                                       9
<PAGE>

decrease in commission income resulted primarily from decreases in premiums
and commissions from key companies represented by Dime.

      Non-Interest Expense.  Total non-interest expense increased $524,000 for
the year ended December 31, 1998, compared to the year ended December 31,
1997.  This increase was largely the result of an increase in compensation and
benefits of $535,000, or 33.01% from $1.6 million for the year ended December
31, 1997, to $2.2 million for the comparable period in 1998.  The primary
cause of this increase is the previously discussed accelerated vesting of
25,921 shares of the MRDP as the result of the death of the Chief Financial
Officer of the Corporation.  The accelerated vesting of deferred compensation
resulted in a $395,000 charge to compensation expense in September 1998.  In
addition, vested shares of the MRDP resulted in a charge of $194,000 for the
year ended December 31, 1998.  The MRDP became effective in January 1998.

     Income Taxes.  Income taxes decreased $130,000 from the year ended
December 31, 1997, as compared to the same period in 1998 as the result of the
decrease in income before income taxes.  The effective combined federal and
state tax rate was 42.0% and 39.4% for the years ended December 31, 1998 and
1997, respectively.  The increase in the 1998 federal and state tax rate is
the result of a portion of the MRDP charge for the year ended December 31,
1998 not being deductible.

                                       10
<PAGE>

    The following table sets forth certain information for the periods
indicated 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 average
yields and costs.  Such yields and costs for the periods indicated are derived
by dividing income or expense by the average monthly balance of assets or
liabilities, respectively, for the periods presented.

<TABLE>
                                         At                       Year Ended
                                     December 31,                 December 31,
                                     -----------  -----------------------------------------------------
                                        1999                1999                         1998
                                      --------    -------------------------   -------------------------
                                       Yield/    Average            Yield/    Average             Yield/
                                        Cost     Balance Interest    Cost     Balance   Interest  Cost
                                       -----     ------- --------  ------     -------   --------  ----
                                                             (Dollars in Thousands)
<S>                                    <C>       <C>       <C>        <C>     <C>         <C>     <C>
Interest-earning assets:
 Loans receivable.................     7.99%     $ 53,713  $4,369     8.13%   $ 48,699    $4,077  8.37%
 Mortgage-backed securities.......     6.60        43,388   2,826     6.51      45,501     3,019  6.64
 Investment securities............     4.45(4)      5,119     191     3.74       6,643       323  4.86
 Other interest-earning assets(1).     6.71         3,789     205     5.40       4,271       246  5.76
                                       ----      --------  ------     ----    --------    ------  ----
   Total interest-earning assets..     7.26       106,009   7,591     7.16     105,114     7,665  7.29
Non-interest-earning assets.......                  3,627                        3,124
                                                 --------                     --------
 Total assets.....................               $109,636                     $108,238
                                                 ========                     ========
Interest-bearing liabilities:
 NOW accounts.....................     2.18        10,820     249     2.30       9,632       227  2.36
 Money market accounts............     4.55         5,008     182     3.63       5,034       168  3.35
 Regular savings..................     3.00        14,319     429     3.00      13,956       436  3.12
 Certificates of deposit..........     5.26        38,505   2,024     5.65      37,846     2,109  5.57
                                       ----      --------  ------     ----    --------    ------  ----
   Total deposits.................     4.26        68,652   2,884     4.20      66,468     2,940  4.42
 Other liabilities................     5.93         5,714     323     5.67       1,393        96  6.87
                                       ----      --------  ------     ----    --------    ------  ----
   Total interest-bearing
    liabilities...................     4.50        74,366   3,207     4.31      67,861     3,036  4.47
Non-interest-bearing liabilities..                  2,434                        2,202
                                                 --------                     --------
Total liabilities.................                 76,800                       70,063
Retained earnings.................                 32,836                       38,175
                                                 --------                     --------
Total liabilities and retained
 earnings.........................               $109,636                     $108,238
                                                 ========                     ========
 Net interest income..............                         $4,384                         $4,629
                                                           ======                         ======
 Interest rate spread(2)..........     2.76%                          2.85%                        2.82%
                                       ====                           ====                         ====
 Net yield on interest-earning
 assets(3)........................     4.14%                          4.40%
                                       ====                           ====
Ratio of average interest-earning
 assets to average interest-
 bearing liabilities..............                                  142.55%                      154.90%
                                                                    ======                       ======

(1)  Includes interest-bearing deposits in other financial institutions and dividends on FHLB stock.
(2)  Interest-rate spread represents the difference between the average yield on interest-earning assets
     and the average cost of interest-bearing liabilities.
(3)  Net yield on interest-earning assets represents net interest income as a percentage of average
     interest-earning assets.
(4)  Includes $2.3 million of FHLMC stock with dividend rate of 1.27% per annum.

                                                         11
</TABLE>
<PAGE>

Rate/Volume Analysis

     The following table sets forth the effects of changing rates and volumes
on net interest income of the  Bank.  Information is provided with respect to
(i) effects on net interest income attributable to changes in volume (changes
in volume multiplied by prior rate); (ii) effects on net interest income
attributable to changes in rate (changes in rate multiplied by prior volume);
(iii) changes in rate/volume (change in rate multiplied by change in volume);
and (iv) the net change (the sum of the prior columns).



<TABLE>

                                      Year Ended December 31,              Year Ended December 31,
                                       1999 Compared to Year                1988 Compared to Year
                                      Ended December 31, 1998              Ended December 31, 1997
                                         Increase (Decrease)                  Increase (Decrease)
                                              Due to                               Due to
                                  ------------------------------     ------------------------------------
                                                    Rate/                                Rate/
                                  Volume   Rate    Volume    Net     Volume      Rate   Volume    Net
                                  ------   ----    ------    ---     ------      -----  ------   ----
                                                             (In Thousands)

<S>                              <C>       <C>        <C>    <C>      <C>      <C>      <C>     <C>
Interest-earning assets:
 Loans receivable............    $  420    $(117)     $(11) $  292    $ 386    $  (29)  $   (2) $ 355
 Mortgage-backed securities..      (140)    ( 56)        3    (193)      47        29        1     77
 Investment securities.......      ( 74)    ( 75)       17    (132)    (346)      184     (107)  (269)
 Other interest-earning assets      (28)     (15)        2     (41)    (202)      ( 8)       3   (207)
    Total interest-earning        -----    -----    ------   -----    -----    ------   ------   ----
     assets..................       178     (263)       11     (74)    (115)      176     (105)    44
Interest expense:                 -----    -----    ------   -----    -----    ------   ------   ----
 Deposits....................        97     (148)      ( 5)    (56)    ( 38)      (44)       1   ( 81)
 Other liabilities...........       297      (17)      (53)    227      (11)       12       (2)    (1)
    Total interest-bearing        -----    -----    ------   -----    -----    ------   ------   ----
     liabilities.............       394     (165)      (58)    171      (49)      (32)      (1)   (82)
Net change in net interest        -----    -----    ------   -----    -----    ------   ------   ----
 income......................     $(216)   $ (98)   $   69   $(245)   $ (66)   $  208   $ (104)  $ 38
                                  ======   ======   =======  ======   ======   ======   =======  =====

                                                       12
</TABLE>
<PAGE>

Asset and Liability Management and Interest Rate Risk

     General.  The ability to maximize net interest income depends largely
upon achieving a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates.  Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time.  The difference, or the interest rate repricing "gap,"
provides an indication of the extent to which an institution's interest rate
spread will be affected by changes in interest rates.  A gap is considered
positive when the amount of interest-rate sensitive assets exceeds the amount
of interest-rate sensitive liabilities, and is considered negative when the
amount of interest-rate sensitive liabilities exceeds the amount of
interest-rate sensitive assets.  Generally, during a period of rising interest
rates, a negative gap within shorter maturities would result in a decrease in
net interest income.  Conversely, during a period of falling interest rates, a
negative gap within shorter maturities would result in an increase in net
interest income.

     In the past, the Bank has perceived its market niche to be that of a
traditional thrift lender that originates fixed rate residential loans for its
portfolio and purchases fixed rate U.S. Government and agency investment
securities and mortgage-backed securities to supplement its lending
activities.  The Bank uses its capital position to absorb the adverse
consequences of the increased interest rate risk associated with this
strategy.  As an integral part of this strategy, the Bank has historically
concentrated its lending activity on the origination of long-term, fixed-rate,
residential one- to four-family mortgage loans and commercial real estate and
multi-family loans.  As of December 31, 1999, 80.4% of the Bank's total loans
were fixed rate loans and 74.3% of its investments and mortgage-backed
securities had fixed interest rates.  During 1999, the Bank expanded its
lending activities to include commercial loans with floating rates.  At
December 31, 1999 commercial loans amounted to $1.8 million, most of which
were floating rates.

     The mismatch between maturities and interest rate sensitivities of
balance sheet items results in interest rate risk.  The Bank has a high level
of interest rate risk as a result of its policies to make fixed-rate,
residential one- to four-family real estate loans and to purchase fixed rate
investment and mortgage-backed securities, which are longer term in nature
than the short-term characteristics of its liabilities for customer deposit
accounts.  Because of its capital position, the Bank has accepted the above
average interest rate risk associated with fixed-rate loans and fixed-rate
investment and mortgage-backed securities in an effort to maximize yield.  See
"-- Liquidity and Capital Resources."

Interest Rate Sensitivity of Net Portfolio Value

     The following table is provided to the Bank by the OTS and illustrates
the change in net portfolio value at December 31, 1999 based on OTS
assumptions.  Net portfolio value is the difference between the Bank's
depository portfolio value and its loans receivable portfolio value.  No
effect has been given to any steps that management of the Bank may take to
counter the effect of the interest rate movements presented in the table.

                                                          Net Portfolio as %
    Basis                                                 of  Portfolio Value
 Point ("bp")           Net Portfolio Value                    of Assets
  Change           ------------------------------          -------------------
 in Rates         $ Amount   $ Change   % Change          NPV Ratio    Change
 --------         --------   --------   --------          ---------    ------
                           (Dollars in Thousands)
  300 bp          $  23,354   (8,600)      (27)%         22.11       (556)bp
  200 bp             26,304   (5,650)      (18)%         24.14       (353)bp
  100 bp             28,909   (3,045)      (10)%         25.81       (186)bp
    0                31,954       --        --           27.67         --
 (100)bp             33,096    1,142         4%          28.26         59 bp
 (200)bp             34,071    2,117         7%          28.72        105 bp
 (300)bp             34,862    2,908         9%          29.07        140 bp

                                       13
<PAGE>

     Under the OTS interest rate risk capital rule (implementation of which
has been postponed), those institutions with greater than "normal" levels of
interest rate risk will be subject to an interest rate risk component in
calculating their risk-based capital ratio.  An institution with a "normal"
level of interest rate risk is defined as one whose "Measured Interest Rate
Risk" is less than 2.0%.

     The following table is provided by the OTS and is based on the
calculations in the previous table.

                                              December 31,       December 31,
                                                  1999               1998
                                              ------------       -----------
RISK MEASURES:  200 BP RATE SHOCK
Pre-Shock NPV Ratio:  NPV as % of PV of
 Assets....................................       27.67%            29.33%
Exposure Measure:  Post-Shock NPV Ratio....       24.14%            27.20%
Sensitivity Measure:  Change in NPV Ratio..       353bp             213 bp

     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  substantially all of the Bank's ARM
loans, have features that restrict changes in interest rates on a short-term
basis (1.5% to 2.0% per adjustment period) and over the life of the asset
(generally 5% over the life).  Furthermore, in the event of a change in
interest rates, expected rates of prepayments on loans and early withdrawals
from certificates could likely deviate significantly from those assumed in
calculating the table.  Therefore, the data presented in the table should not
be relied upon as indicative of actual results.

Liquidity and Capital Resources

     The Bank's primary sources of funds are proceeds from principal and
interest payments on loans, maturing securities and certificates of deposit.
The proceeds from the sale of available-for-sale securities and FHLB advances
are additional sources of liquidity.  While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.

     Historically, the primary investing activity of the Bank has been the
origination of one- to four-family mortgage loans.  During the year ended
December 31, 1999, the Bank originated mortgage loans in the amount of $24.1
million.  During this period, the Bank purchased mortgage-backed securities of
$15.6 million.  The Bank also invests in investment grade federal agency
securities.

     The Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit
withdrawals, to satisfy financial commitments and to take advantage of
investment opportunities.  During the year ended December 31, 1999 and 1998,
the Bank used its sources of funds primarily to fund loan commitments and to
pay deposit withdrawals.

     The Bank uses cash flows generated from operating, investing and
financing activities to meet its liquidity requirements.  See Consolidated
Statements of Cash Flows included as part of the Consolidated Financial
Statements.

     Like most thrift institutions, deposits, particularly certificates of
deposit, have been the primary source of external funds for the Bank.  By
offering interest rates that are competitive with or at a slight premium to
the average rate paid by local competitors, the Bank has had limited success
in lengthening the maturity of its certificate of deposit portfolio.  At
December 31, 1999, certificates of deposit amounted to $39.2 million, or 55.0%
of total deposits, including $11.4 million which were scheduled to mature in
more than one year after December 31, 1999.  At December 31, 1999, $27.9
million of certificates of deposit were scheduled to mature within one year.
Historically, the Bank has

                                       14
<PAGE>

been able to retain a significant amount of maturing deposits.  Management of
the Bank believes it has adequate resources to fund all loan commitments by
deposits and, if necessary, FHLB advances are available.  Additionally, the
Bank can adjust the offering rates of savings certificates to retain deposits
in changing interest rate environments.

     The OTS requires a savings institution to maintain an average daily
balance of liquid assets (cash and eligible investments) equal to at least
4.0% of the average daily balance of its net withdrawable deposits and
short-term borrowings.  The OTS recently eliminated short term ratios.  The
Bank's liquidity ratio at December 31, 1999 was 9.54%.  The Bank consistently
maintains liquidity levels in excess of regulatory requirements, and believes
this is an appropriate strategy for proper asset and liability management.

     The Bank is required to maintain specific amounts of capital pursuant to
OTS requirements.  As of December 31, 1999, the Bank was in compliance with
all regulatory capital requirements which were effective as of such date with
tangible, core and risk-based capital ratios of 25.65%, 25.65% and 56.13%,
respectively.  For a detailed discussion of regulatory capital requirements
and a numerical presentation of the Bank's capital levels relative to
regulatory requirements, see Note 13 of Notes to the Consolidated Financial
Statements.

     The Corporation, as the holding company for the Bank, does not have any
source of cash flow other than interest and principal payments on loans to the
Bank and dividends declared by the Bank.  At December 31, 1999 the
Corporation's loans to the Bank amounted to $2.6 million.  No dividends have
been paid to the Corporation as of December 31, 1999.

Effect of Inflation and Changing Prices

     The Consolidated Financial Statements and related financial data
presented herein have been prepared in accordance with generally accepted
accounting principles, which generally 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 the Bank'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.

                                       15
<PAGE>

                            [LETTERHEAD OF KPMG LLP]

                           Independent Auditors' Report


The Board of Directors and Stockholders
Empire Federal Bancorp, Inc.:


We have audited the accompanying consolidated balance sheets of Empire Federal
Bancorp, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for the years then ended.  These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Empire
Federal Bancorp, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.

/s/ KPMG LLP

Billings, Montana
February 18, 2000

                                       16
<PAGE>

             EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
                      Consolidated Balance Sheets

                                                          December 31,
                                                  --------------------------
                   Assets                              1999           1998
                   ------                         ------------  ------------

Cash and due from banks                           $  1,688,206     2,092,487
Interest-bearing deposits                              683,913     3,061,310
                                                  ------------  ------------
   Cash and cash equivalents                         2,372,119     5,153,797

Investment and mortgage-backed securities
 available-for-sale                                 41,090,151    39,865,809
Mortgage-backed securities held-to-maturity
 (estimated market value of $6,367,598 and
 $10,582,975 at December 31, 1999 and 1998,
 respectively)                                     l6,406,467     10,497,993
Loans receivable, net                               59,569,783    49,499,156
Stock in Federal Home Loan Bank of Seattle,
 at cost                                             1,463,500     1,360,600
Accrued interest receivable                            451,386       353,145
Income tax receivable                                   36,069        46,899
Premises and equipment, net                          2,860,330     2,140,807
Prepaid expenses and other assets                      276,963       282,965
                                                  ------------  ------------
   Total assets                                   $114,526,768   109,201,171
                                                  ============  ============
     Liabilities and Stockholders' Equity
     ------------------------------------
Liabilities:
 Deposits                                         $ 71,353,098    66,412,597
 Advances from Federal Home Loan Bank                8,000,000     4,000,000
 Other borrowed funds                                  800,000            --
 Note payable                                          591,847       647,443
 Advances from borrowers for taxes and insurance       229,437       232,492
 Accrued expenses and other liabilities                276,793       291,260
 Deferred income taxes                                 520,376     1,316,255
                                                  ------------  ------------
   Total liabilities                                81,771,551    72,900,047
                                                  ------------  ------------
Stockholders' equity:
 Preferred stock, par value $.01 per share,
  250,000 shares authorized, none issued
  and outstanding                                           --            --
 Common stock, par value $.01 per share,
  4,000,000 shares authorized, 2,592,100 issued         25,921        25,921
 Additional paid-in capital                         25,260,408    25,277,770
 Unearned ESOP and MRDP compensation                (2,264,623)   (2,501,054)
 MRDP shares acquired                                 (302,011)     (432,215)
 Retained earnings, substantially restricted        17,842,091    17,327,635
 Treasury shares acquired, at cost, 590,830
  and 369,698 shares at December 31, 1999
  and 1998, respectively                            (8,439,462)   (5,310,819)
 Accumulated other comprehensive income                632,893     1,913,886
                                                  ------------  ------------
   Total stockholders' equity                       32,755,217    36,301,124
                                                  ------------  ------------
Commitments and contingencies

   Total liabilities and stockholders' equity     $114,526,768   109,201,171
                                                  ============  ============

See accompanying notes to consolidated financial statements.

                                       17
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
                   Consolidated Statements of Income

                                                   Years Ended December 31,
                                                  --------------------------
                                                       1999           1998
                                                  ------------  ------------

 Loans receivable                                   $ 4,369,032    4,077,146
 Mortgage-backed securities                           2,826,478    3,019,006
 Investment securities                                  191,483      323,107
 Other                                                  204,608      246,146
                                                    -----------  -----------
  Total interest income                               7,591,601    7,665,405
                                                    -----------  -----------
Interest expense:
 Passbook accounts                                      428,816      434,527
 NOW accounts                                           431,259      395,654
 Certificates of deposit                              2,023,789    2,110,278
 Advances from Federal Home Loan Bank                   267,411       34,413
 Note payable and other                                  56,404       61,312
                                                    -----------  -----------
  Total interest expense                              3,207,679    3,036,184
                                                    -----------  -----------
  Net interest income                                 4,383,922    4,629,221

Provision for loan losses                                17,615       20,000
                                                    -----------  -----------
  Net interest income after provision for loan
   losses                                             4,366,307    4,609,221

Non-interest income:
 Insurance commission income                            575,610      624,238
 Customer service charges                               228,837      216,050
 Other                                                   24,805       32,093
                                                    -----------  -----------
  Total non-interest income                             829,252      872,381

Non-interest expense:
 Compensation and benefits                            1,839,472    2,155,606
 Occupancy and equipment                                408,723      378,490
 Deposit insurance premiums                              65,188       71,917
 Data processing services                               122,957      107,082
 Other                                                  686,016      622,386
                                                    -----------  -----------
  Total non-interest expense                          3,122,356    3,335,481
                                                    -----------  -----------
  Income before income taxes                          2,073,203    2,146,121

Income taxes                                            808,074      901,523
                                                    -----------  -----------
  Net income                                        $ 1,265,129    1,244,598
                                                    ===========  ===========
Basic earnings per share                            $       .70          .56
                                                    ===========  ===========
Diluted earnings per share                          $       .70          .56
                                                    ===========  ===========

See accompanying notes to consolidated financial statements.

                                       18
<PAGE>

<TABLE>

                                         EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Stockholders' Equity and Comprehensive Income
                                             Years Ended December 31, 1999 and 1998

                                                                                     Accumu-
                                     Unearned                                        lated
                                       ESOP                                          other        Total
                          Additional  and MRDP      MRDP                 Treasury    compre-      stock-
                Common     paid-in    compen-       shares    Retained   shares      hensive     holders'
                stock      capital    sation       acquired   earnings   acquired    income      equity
                ------    ---------- ----------   ---------  ----------  --------    --------   ----------
 <S>           <C>        <C>        <C>          <C>        <C>         <C>         <C>        <C>
Balances at
 December 31,
 1997          $25,921   25,208,225 (1,935,430)  (801,875)  16,815,367         --   1,286,180 40,598,388
Repurchase of
 53,684 common
 shares for MRDP    --          --          --   (926,976)          --          --         --   (926,976)
Repurchase of
 369,698 shares
 of common stock    --          --          --         --           --  (5,310,819)        -- (5,310,819)
ESOP shares
 committed to
 be released        --      73,371     138,240         --           --          --         --    211,611
Grant of 77,763
 MRDP shares        --      (3,826) (1,292,810) 1,296,636           --          --         --         --
MRDP shares
 vested             --          --     588,946         --           --          --         --    588,946
Comprehensive income:
 Net income         --          --          --         --    1,244,598          --         --  1,244,598
 Increase in
  unrealized
  gain on
  securities        --          --          --         --           --          --    627,706    627,706
  Comprehensive                                                                               ----------
   income, net      --          --          --         --           --          --         --  1,872,304
Cash dividends
 declared
 ($.32 per
 share)             --          --          --         --     (732,330)         --         --   (732,330)
               -------  ----------  ----------   --------   ----------  ----------   ------   ----------
Balances at
 December 31,
 1998           25,921  25,277,770  (2,501,054)  (432,215)  17,327,635  (5,310,819) 1,913,886 36,301,124
Repurchase of
 221,132 shares
 of common stock    --          --          --         --           --  (3,128,643)      --   (3,128,643)
ESOP shares
 committed to
 be released        --      26,545     138,240         --           --          --       --      164,785
Award of 7,776
 MRDP shares        --     (38,744)    (91,460)   130,204           --          --       --           --
MRDP shares
 vested             --      (5,163)    189,651         --           --          --       --      184,488
Comprehensive
 income:
 Net income         --          --          --         --    1,265,129          --       --    1,265,129
 Decrease in
  unrealized
  gain on
  securities        --          --          --         --           --            (1,280,993) (1,280,993)
                                                                                              ----------
  Comprehensive
   loss, net                                                                                     (15,864)
Cash dividends
 declared ($.40
 per share)         --          --          --         --     (750,673)         --       --     (750,673)
               -------  ----------  ----------   --------   ----------  ----------   ------   ----------
Balances at
 December 31,
 1999          $25,921  25,260,408  (2,264,623)  (302,011)  17,842,091  (8,439,462)  632,893  32,755,217
               =======  ==========  ==========   ========   ==========  ==========   =======  ==========

See accompanying notes to consolidated financial statements.

                                                        19
</TABLE>
<PAGE>

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows

                                                   Years Ended December 31,
                                                  --------------------------
                                                       1999           1998
                                                  ------------  ------------
Cash flows from operating activities:
 Net income                                         $ 1,265,129    1,244,598
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Provision for loan losses                             17,615       20,000
   Depreciation                                         233,496      188,918
   Loss on retirement of premises and equipment, net      2,435        9,100
   Amortization of premiums and discounts on loans
    and mortgage-backed securities, net                 (39,697)    (141,612)
   Stock dividends reinvested in Federal Home Loan
    Bank stock                                         (102,900)     (99,500)
   ESOP shares committed to be released                 155,067      211,611
   MRDP compensation expense                            184,488      588,946
   Decrease (increase) in accrued interest receivable   (98,241)      74,351
   Decrease in prepaid expenses and other assets          6,002      108,705
   Decrease in accrued expenses and other liabilities   (14,467)    (160,102)
   Increase (decrease) in income taxes                   10,830     (110,142)
   Increase (decrease) in deferred income taxes          23,116       (7,488)
                                                    -----------  -----------
     Net cash provided by operating activities        1,642,873    1,927,385
                                                    -----------  -----------
Cash flows from investing activities:
 Net increase in loans receivable                   (10,087,684)  (3,805,089)
 Purchases of mortgage-backed securities
  available-for                                     (15,600,940) (21,835,449)
 Purchases of investment securities available-
  for-sale                                           (1,000,000)    (510,528)
 Proceeds from maturities or called investment
  securities:
  Available-for-sale                                         --    4,500,000
  Held-to-maturity                                           --    1,500,000
 Principal payments on mortgage-backed securities:
  Held-to-maturity                                    4,077,391    8,556,313
  Available-for-sale                                 13,329,884   15,647,800
 Purchases of premises and equipment                   (955,454)    (287,587)
                                                    -----------  -----------
     Net cash provided by (used in) investing
      activities                                    (10,236,803)   3,765,460
                                                    -----------  -----------
Cash flows from financing activities:
 Net change in deposits                               4,940,501     (446,495)
 Proceeds from advances from Federal Home Loan Bank   6,000,000    5,250,000
 Repayment of advances from Federal Home Loan Bank   (2,000,000)  (1,250,000)
 Net increase in other borrowed funds                   800,000           --
 Payments on note payable                               (55,596)     (50,693)
 Net increase (decrease) in advances from
  borrowers for taxes and insurance                      (3,055)      24,234
 Payments of dividends                                 (740,955)    (732,330)
 Purchase of stock for MRDP                                  --     (926,976)
 Purchase of treasury stock                          (3,128,643)  (5,310,819)
                                                    -----------  -----------
     Net cash provided by (used in) financing
      activities                                      5,812,252   (3,443,079)
                                                    -----------  -----------
Net increase (decrease) in cash and cash
 equivalents                                         (2,781,678)   2,249,766
Cash and cash equivalents, beginning of year          5,153,797    2,904,031
                                                    -----------  -----------
Cash and cash equivalents, end of year              $ 2,372,119    5,153,797
                                                    ===========  ===========
Cash paid during the year for:
 Interest                                            $3,198,000   3,043,000
 Income taxes                                           774,000   1,022,000
                                                    ===========  ===========
Non-cash operating and financing activity:
 Payment of dividends on allocated ESOP shares      $     9,718          --
                                                    ===========  ===========

See accompanying notes to consolidated financial statements.

                                       20
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements
                       December 31, 1999 and 1998

(1) Summary of Significant Accounting Policies

   (a)    General

The accompanying consolidated financial statements include the accounts of
Empire Federal Bancorp, Inc. (the Holding Company) and its wholly-owned
subsidiary, Empire Federal Savings Bank (Empire).  The consolidated financial
statements also include Dime Service Corporation (Dime), a wholly-owned
subsidiary of Empire.  The Holding Company, Empire and Dime are herein
referred to collectively as "the Company."  All significant intercompany
balances and transactions have been eliminated in consolidation.

Empire provides services to customers in south central Montana through a main
office and two branches in three separate communities.  Empire offers a
variety of deposit products to its customers while concentrating its lending
activities on real estate loans.  These real estate lending activities focus
primarily on the origination of loans secured by one- to four-family
residential real estate but also include the origination of multi-family,
commercial real estate, home equity and commercial loans.  Empire is subject
to competition from other financial service providers and is also subject to
the regulations of certain federal and state agencies and undergoes periodic
examinations by those regulatory authorities.

Dime was formed in December 1985 to conduct business as an insurance agency.

   (b)    Basis of Presentation

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles.  In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the balance sheet and income and expenses for the period.  Actual results
could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses.
Management believes that the allowance for loan losses is adequate, however,
future additions to the allowance may be necessary based on changes in factors
affecting the borrowers' ability to repay.  In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the allowance for loan losses.  Such agencies may require Empire to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.

   (c)    Cash Equivalents

For purposes of the statements of cash flows, the Company considers all cash,
daily interest demand deposits, amounts due from banks and interest-bearing
deposits with banks with original maturities of three months or less to be
cash equivalents.

                                       21                         (Continued)


<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

   (d) Investment and Mortgage-Backed Securities

Investment and mortgage-backed securities available-for-sale include
securities that management intends to use as part of its overall asset/
liability management strategy and that may be sold in response to changes in
interest rates and resultant prepayment risk and other related factors.
Securities available-for-sale are carried at fair value and unrealized gains
and losses (net of related tax effects) are excluded from earnings and
reported as a separate component of stockholders' equity.  Investment
securities and mortgage-backed securities, other than those designated as
available-for-sale or trading, are comprised of debt securities  for which the
Company has the positive intent and ability to hold to maturity and are
carried at cost.  Management determines the appropriate classification of
investment and mortgage-backed securities as either available-for-sale or
held-to-maturity at the purchase date.

Declines in the fair value of securities below carrying value that are other
than temporary are charged to expense as realized losses and the related
carrying value reduced to fair value.

The carrying value of debt securities is adjusted for amortization of premiums
and accretion of discounts using the interest method over the estimated lives
of the securities.  The cost of investments sold is determined by specific
identification.

   (e)    Loans Receivable

Loans receivable are stated at unpaid principal balances, less unearned
discounts and net deferred loan origination fees.  Interest on loans is
credited to income as earned.  Interest receivable is accrued only if deemed
collectible.  Discounts on purchased loans are amortized using the level-yield
method over the remaining period to contractual maturity, adjusted for
anticipated prepayments.

The allowance for loan losses is based on management's evaluation of the
adequacy of the allowance, including an assessment of past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral, current economic conditions, and independent
appraisals.

Additions to the allowance arise from charges to operations through the
provision for loan losses or from the recovery of amounts previously charged
off.  The allowance is reduced by loans charged off.  Loans are charged off
when management believes there has been permanent impairment of their carrying
values.

Accrued interest on loans that are contractually past due ninety days or more
is generally charged off against income.  Interest is subsequently recognized
only to the extent cash payments are received until, in management's judgment,
the borrower's ability to make periodic interest and principal payments is
reasonably assured, in which case the loan is returned to accrual status.

                                       22                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

The Company also provides an allowance for losses on specific loans which are
deemed to be impaired.  Groups of small-balance homogeneous loans (generally
residential real estate and consumer loans) are evaluated for impairment
collectively.  A loan is considered impaired when, based upon current
information and events, it is probable that the Company will be unable to
collect, on a timely basis, all principal and interest according to the
contractual terms of the loan's original agreement.  When a specific loan is
determined to be impaired, the allowance for loan losses is increased through
a charge to expense for the amount of the impairment.  The amount of the
impairment is measured using cash flows discounted at the loan's effective
interest rate, except when it is determined that the sole source of repayment
for the loan is the operation or liquidation of the underlying collateral.  In
such cases, the current value of the collateral, reduced by anticipated
selling costs, will be used in place of discounted cash flows.  The Company
uses the cash basis of income recognition on impaired loans.

The Company's existing policies for evaluating the adequacy of the allowance
for loan losses and policies for discontinuing the accrual of interest on
loans are used to establish the basis for determining whether a loan is
impaired.  At December 31, 1999 and 1998, impaired loans were not material.

   (f)    Loan Origination Fees and Related Costs

Loan origination fees and certain direct loan origination costs are deferred
and the net fee or cost is recognized as interest income using the level-yield
method over the contractual life of the loans, adjusted for prepayments.

   (g)    Stock in Federal Home Loan Bank

Member institutions of the Federal Home Loan Bank (FHLB) System are required
to hold common stock of its district FHLB according to predetermined formulas.

   (h)    Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using straight-line and accelerated methods over the
estimated useful lives of 40 years for the buildings, 7 to 15 years for
improvements and 3 to 15 years for furniture, fixtures and equipment.

   (i)    Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future
consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

                                       23                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

   (j)    Earnings Per Share

Basic earnings per share (EPS) is calculated by dividing net income available
to common stockholders by the weighted average number of common shares
outstanding during the period less unvested Management Recognition and
Development Plan (MRDP) shares and unallocated Employee Stock Ownership Plan
(ESOP) shares.

Diluted EPS is calculated by dividing net income by the weighted average
number of common shares used to compute basic EPS plus the incremental amount
of potential common stock determined by the treasury stock method.

   (k)    Long-Lived Assets

Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or circumstances indicate that the carrying amount
of an asset may not be recoverable.  An impairment loss is recognized if the
sum of the expected future cash flows is less than the carrying amount of the
asset.  No long-lived assets were identified as impaired as of December 31,
1999 and 1998.

   (l)    Stock-Based Compensation to Employees

Compensation cost for stock-based compensation to employees is measured at the
grant date using the intrinsic value method.  Under the intrinsic value
method, compensation cost is the excess of the market price of the stock at
the grant date over the amount an employee must pay to ultimately acquire the
stock and is recognized over any related service period.

   (m)    Comprehensive Income

Comprehensive income includes net income, as well as other changes in
stockholders' equity that result from transactions and economic events other
than those with stockholders.  The Company's only significant element of
comprehensive income is unrealized gains and losses on available-for-sale
securities.  There were no reclassification adjustments to other comprehensive
income during the years ended December 31, 1999 and 1998.  Unrealized gains
and losses reported as other comprehensive income during the years ended
December 31, 1999 and 1998, net of related income taxes, were $(1,280,993) and
$627,706, respectively.

                                       24                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

   (n)    Derivative Instruments

In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued.  SFAS No. 133 establishes accounting and reporting
standards requiring that derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value.  SFAS No. 133
requires that changes in the derivatives fair value be recognized currently in
earnings unless specific hedge accounting criteria are met.  Management of the
Company is currently assessing the effect, if any, on its financial statements
of implementing SFAS No. 133.  The Company will be required to adopt the
standard on January 1, 2001.

(2)   Investment and Mortgage-Backed Securities Available-For-Sale

The amortized cost, unrealized gains and losses, and estimated fair values of
investment and mortgage-backed securities available-for-sale at December 31
are as follows:
                                                   1999
                           ---------------------------------------------------
                                            Gross        Gross     Estimated
                              Amortized   unrealized   unrealized    fair
                                cost        gains        losses      value
                           ------------  ----------   ----------  -----------
United States Government
 and agency obligations    $  2,489,495          --      (35,005)   2,454,490
FHLMC common stock               55,291   2,203,709           --    2,259,000
Mutual funds                    360,528          --       (4,843)     355,685
                           ------------  ----------   ----------  -----------
                              2,905,314   2,203,709      (39,848)   5,069,175
Mortgage-backed securities:
  GNMA certificates           4,759,829          --     (157,937)   4,601,892
  FHLMC certificates          2,130,286          --      (19,684)   2,110,602
  FNMA certificates          14,714,995      10,807     (433,063)  14,292,739
  REMIC certificates         15,542,198      18,454     (544,909)  15,015,743
                           ------------  ----------   ----------  -----------
                             37,147,308      29,261   (1,155,593)  36,020,976
                           ------------  ----------   ----------  -----------
                           $ 40,052,622   2,232,970   (1,195,441)  41,090,151
                           ============  ==========   ==========  ===========

                                       25                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

                                                   1998
                           ---------------------------------------------------
                                            Gross        Gross     Estimated
                              Amortized   unrealized   unrealized    fair
                                cost        gains        losses      value
                           ------------  ----------   ----------  -----------
United States Government
 and agency obligations    $  2,489,495          --      (35,005)   2,454,490

United States Government
 and agency obligations    $  1,489,495      46,005           --    1,535,500
FHLMC common stock               55,291   3,037,709           --    3,093,000
Mutual funds                    360,528       8,420       (2,248)     366,700
                           ------------  ----------   ----------  -----------
                              1,905,314   3,092,134       (2,248)   4,995,200
Mortgage-backed securities:
  GNMA certificates           5,442,915      10,971      (45,063)   5,408,823
  FHLMC certificates          4,200,511      17,988         (871)   4,217,628
  FNMA certificates          11,996,799      94,864      (25,448)  12,066,215
  REMIC certificates         13,182,753      49,605      (54,415)  13,177,943
                           ------------  ----------   ----------  -----------
                             34,822,978     173,428     (125,797)  34,870,609
                           ------------  ----------   ----------  -----------
                           $ 36,728,292   3,265,562     (128,045)  39,865,809
                           ============  ==========   ==========  ===========


The REMICs consist of fifteen certificates which are backed by the FNMA or the
FHLMC.

Maturities of securities available-for-sale at December 31, 1999 are shown
below.  Contractual maturities of securities do not reflect repricing
opportunities present in many adjustable rate securities, nor do they reflect
expected shorter maturities based upon early prepayments of principal.

                                                              Estimated fair
                                           Amortized cost          value
                                           --------------     --------------
Due after one year through five years      $    1,000,000            986,690
Due after five years through ten years          1,489,495          1,467,800
                                           --------------     --------------
                                                2,489,495          2,454,490
Equity securities                                 415,819          2,614,685
Mortgage-backed securities                     37,147,308         36,020,976
                                           --------------     --------------
                                           $   40,052,622         41,090,151
                                           ==============     ==============

There were no sales of investment securities available-for-sale during the
years ended December 31, 1999 and 1998.

The Company has not entered into any interest rate swaps, options or future
contracts.  All of the U.S. Government and agency obligations at December 31,
1999 have call features.

                                       26                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

(3)   Mortgage-Backed Securities Held-to-Maturity

The amortized cost, unrealized gains and losses, and estimated fair values of
mortgage-backed securities held-to-maturity at December 31 are summarized as
follows:

                                                   1999
                           ---------------------------------------------------
                                            Gross        Gross     Estimated
                              Amortized   unrealized   unrealized    fair
                                cost        gains        losses      value
                           ------------  ----------   ----------  -----------
Mortgage-backed securities:
  GNMA certificates        $  1,033,484      19,932       (4,676)   1,048,740
  FHLMC certificates          1,332,603      13,195      (18,179)   1,327,619
  FNMA certificates           2,993,652      10,785      (20,371)   2,984,066
  REMIC certificates          1,046,728         435      (39,990)   1,007,173
                           ------------  ----------   ----------  -----------
                           $  6,406,467      44,347      (83,216)   6,367,598
                           ============  ==========   ==========  ===========

                                                   1998
                           ---------------------------------------------------
                                            Gross        Gross     Estimated
                              Amortized   unrealized   unrealized    fair
                                cost        gains        losses      value
                           ------------  ----------   ----------  -----------
Mortgage-backed securities:
  GNMA certificates        $  1,453,319      30,398       (3,163)   1,480,554
  FHLMC certificates          3,193,461      53,795      (16,129)   3,231,127
  FNMA certificates           4,480,501      59,531       (5,912)   4,534,120
  REMIC certificates          1,370,712          --      (33,538)   1,337,174
                           ------------  ----------   ----------  -----------
                           $ 10,497,993     143,724      (58,742)  10,582,975
                           ============  ==========   ==========  ===========

The REMICs consist of two certificates which are backed by the FNMA and the
FHLMC.

There were no sales of investment securities held-to-maturity during the years
ended December 31, 1999 and 1998.

                                       27                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

(4)   Loans Receivable, Net

Loans receivable, net at December 31 are summarized as follows:

                                                  1999           1998
                                             -------------   ------------
First mortgage loans:
  One to four family                         $  41,723,724     39,941,492
  Multi-family                                   5,307,547      4,730,581
  Commercial real estate                         7,108,194      2,226,834
Construction loans                               2,409,000        265,000
Commercial non-mortgage                          1,789,117             --
Loans to depositors, secured by savings            486,192        473,940
Other consumer loans                             2,545,692      2,595,351
                                             -------------   ------------
                                                61,369,466     50,233,198
Less:
  Unearned discounts                                (1,664)        (2,222)
  Undisbursed portion of mortgage loans         (1,223,918)      (207,939)
  Allowance for loan losses                       (226,215)      (220,000)
  Net deferred loan origination fees              (347,886)      (303,881)
                                             -------------   ------------
                                             $  59,569,783     49,499,156
                                             =============   ============

Loans receivable include approximately $5,500,000 and $3,000,000 in adjustable
rate loans at December 31, 1999 and 1998, respectively.

Real estate loans serviced for others totaled approximately $0 and $33,000 at
December 31, 1999 and 1998, respectively.

A summary of activity in the allowance for loan losses for the years ended
December 31 is as follows:

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

Balance at beginning of year                 $     220,000        200,000
Provision charged to expense                        17,615         20,000
Losses charged against the allowance               (11,400)            --
                                             -------------   ------------
Balance at end of year                       $     226,215        220,000
                                             =============   ============

(5)   Accrued Interest Receivable

Accrued interest receivable at December 31 is summarized as follows:

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

Loans receivable                             $     301,738        246,725
Mortgage-backed securities                          88,526         84,438
Investment securities and interest-
 bearing deposits                                   61,122         21,982
                                             -------------   ------------
                                             $     451,386        353,145
                                             =============   ============

                                       28                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

(6)   Premises and Equipment

Premises and equipment at December 31 is summarized as follows:

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

Buildings and improvements                   $   1,690,455      1,674,200
Land                                               529,165        529,165
Furniture, fixtures and equipment                1,244,873      1,157,569
Construction in progress                           779,899             --
                                             -------------   ------------
                                                 4,244,392      3,360,934
Accumulated depreciation                        (1,384,062)    (1,220,127)
                                             -------------   ------------
                                             $   2,860,330      2,140,807
                                             =============   ============

Included in construction in progress at December 31, 1999 is $700,000 related
to the purchase of a building and land for a new branch in Billings, Montana,
$26,050 of remodeling costs for the new branch and $53,849 of costs to remodel
the Livingston office branch.  At December 31, 1999, the Company had entered
into various construction contracts related to the remodeling projects.  The
major contracts aggregated approximately $471,000 and $107,000 for the
Livingston and Billings branches, respectively, and are expected to be
completed by April 2000.

(7)   Deposits

Deposits at December 31 are summarized as follows:

<TABLE>
                                   Weighted
                               average rate at
                              December 31, 1999      Amount        Percent        Amount         Percent
                              -----------------  ------------      -------     ------------      -------
<S>                              <C>             <C>                <C>        <C>                <C>
Passbook accounts                    3.00%       $ 13,915,458        19.5%     $ 13,928,934        21.0%
NOW accounts                         2.72%         18,202,040        25.5        14,757,910        22.2
32,117,498
45.0
28,686,844
43.2
Certificates of deposit:         3.01 to 4.00%            633          --               613          --
                                 4.01 to 5.00%     19,061,378        26.7         7,015,207        10.6
                                 5.01 to 6.00%     17,785,868        24.9        27,731,893        41.8
                                 6.01 to 7.00%      1,543,421         2.2         1,600,384         2.4
                                 7.01 to 8.00%        844,300         1.2         1,377,656         2.0
  Total certificates of
   deposit                           5.49%         39,235,600        55.0        37,725,753        56.8
                                                 ------------       -----      ------------       -----
                                     4.30%       $ 71,353,098       100.0%     $ 66,412,597       100.0%
                                                 ============       =====      ============       =====

                                                        29                                   (Continued)
</TABLE>
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Certificates of deposit at December 31, 1999 are scheduled to mature as
follows:

  Year ending December 31:
       2000                                          $  27,861,091
       2001                                              8,449,631
       2002                                              1,424,696
       2003                                                734,389
       2004                                                247,571
       2005 and thereafter                                 518,222
                                                     -------------
                                                     $  39,235,600
                                                     =============

Certificates of deposit of $100,000 or greater were approximately $5,037,000
and $2,845,000 at December 31, 1999 and 1998, respectively.  Amounts in excess
of $100,000 are not insured by a federal agency.

Accrued interest payable on deposits (included in accrued expenses and other
liabilities) was approximately $103,000 and $93,000 at December 31, 1999 and
1998, respectively.

(8)   Advances From Federal Home Loan Bank

Advances from the Federal Home Loan Bank at December 31 are summarized as
follows:

                                                  1999           1998
                                             -------------   ------------
4.72% to 5.80% fixed rate advances,
 interest payable monthly                    $   4,000,000      4,000,000
Variable rate advances (6.48% to 6.53%
 at December 31, 1999), interest payable
 monthly                                         4,000,000             --
                                             -------------   ------------
                                             $   8,000,000      4,000,000
                                             =============   ============

Contractual principal repayments on advances from the Federal Home Loan Bank
subsequent to December 31, 1999 are as follows:

  Year ending December 31:
       2000                                          $   4,000,000
       2001                                              2,000,000
       2002                                                    --
       2003                                                500,000
       2004                                                    --
       Thereafter                                        1,500,000
                                                     -------------
                                                     $   8,000,000
                                                     =============

The weighted average interest rate on these advances was 5.77% and 5.01% at
December 31, 1999 and 1998, respectively.

                                       30                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

At December 31, 1999, Empire had a Cash Management Advance (CMA) note with a
maximum allowable advance of $5,457,500 maturing on March 22, 2000.  There was
an outstanding balance of $800,000 and $0 as of December 31, 1999 and 1998,
respectively.

The advances from FHLB and the CMA note are collateralized by investments with
an amortized cost of approximately $45,554,000 and a market value of
approximately $44,350,000 at December 31, 1999.

(9)   Note Payable

During 1997, the Company entered into an agreement with an officer of the
Company and related individuals to purchase the Livingston, Montana main
office building.  The purchase was financed with a long-term note.  The note
is being paid in quarterly payments of $28,000 including interest at 9%.  The
note is secured by the building.

(10)  Income Taxes

Income tax expense (benefit) for the years ended December 31 is summarized as
follows:
                                   Federal         State            Total
                                 ----------      ---------        ---------
1999:
  Current                        $  648,121        136,837          784,958
  Deferred                           19,058          4,058           23,116
                                 ----------      ---------        ---------
                                 $  667,179        140,895          808,074
                                 ==========      =========        =========
1998:
  Current                        $  752,572        156,439          909,011
  Deferred                           (6,174)        (1,314)          (7,488)
                                 ----------      ---------        ---------
                                 $  746,398        155,125          901,523
                                 ==========      =========        =========

Income tax expense for the years ended December 31 differs from "expected"
income tax expense (computed by applying the Federal corporate income tax rate
of 34% to income before income taxes) as follows:

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

Computed "expected" tax expense              $     704,889        729,681
Increase (decrease) resulting from:
  State taxes, net of Federal income
   tax benefit                                      92,990        102,383
  Compensation expense on MRDP vested
   shares not deductible                                --         29,920
  Mark-to-market adjustment on ESOP
   shares committed to be released                   9,025         24,946
  Other                                              1,170         14,593
                                             -------------   ------------
                                             $     808,074        901,523
                                             =============   ============
                                       31                        (Continued)
<PAGE>


              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Temporary differences between the financial statement carrying amounts and the
tax bases of assets and liabilities that give rise to significant portions of
deferred tax assets and liabilities at December 31 are as follows:

                                                  1999           1998
                                             -------------   ------------
Deferred tax assets:
  Allowance for loan losses                  $      86,991         84,601
  Deferred loan origination fees                   134,419        117,712
  Deferred compensation accrual                     29,117         26,534
  Vested MRDP shares                                72,930         74,054
                                              -------------   ------------
    Gross deferred tax assets                      323,457        302,901
Deferred tax liabilities:                     -------------   ------------
  Federal Home Loan Bank stock dividends          (411,353)      (367,707)
  Premises and equipment, principally due
   to differences in depreciation                  (23,036)       (19,768)
  Prepaid deposit insurance premium                 (2,864)        (3,846)
  Unrealized gain on securities
   available-for-sale                             (404,636)    (1,223,631)
  Other, net                                        (1,944)        (4,204)
                                             -------------   ------------
      Gross deferred tax liabilities              (843,833)    (1,619,156)
                                             -------------   ------------
      Net deferred tax liability             $    (520,376)    (1,316,255)
                                             =============   ============

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized.  The ultimate realization of deferred tax
assets is dependent upon the existence of, or generation of, taxable income in
the periods in which those temporary differences are deductible.  Management
considers the scheduled reversal of deferred tax liabilities, taxes paid in
carryback years, projected future taxable income, and tax planning strategies
in making this assessment.  Based upon the level of historical taxable income
and estimates of future taxable income over the periods in which the deferred
tax assets are deductible, at December 31, 1999 and 1998, management believes
it is more likely than not that the Company will realize the benefits of these
deductible differences.

Retained earnings at December 31, 1999 includes approximately $3,320,000 for
which no provision for Federal income tax has been made.  This amount
represents the base year tax bad debt reserve at December 31, 1986.  This
amount is treated as a permanent difference and deferred taxes are not
recognized unless it appears that this amount will be reduced and thereby
result in taxable income in the foreseeable future.  The Company is not
currently contemplating any changes in its business or operations which would
result in a recapture of this Federal bad debt reserve into taxable income.

                                       32                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

(11)  Employee Benefit Plans

Retirement Plan.  The Company has a noncontributory multi-employer trustee
defined benefit pension plan.  Actuarially determined pension costs are funded
as required by the trustee.  Information related to the Company's portion of
the actuarial present value of benefits is not available.  Consulting
actuaries to the plan have indicated the plan reached the ERISA full funding
limitation during 1999 and 1998.  Contributions to the plan were $0 and $2,158
for the years ended December 31, 1999 and 1998, respectively.

Savings Plan.  During January 1999, the Company adopted a 401(k) savings plan.
The Company allows eligible employees to contribute up to 15% of their monthly
wages.  The Company matches an amount equal to 50% of the employee's
contribution, up to 6% of total wages.  Participants are at all times fully
vested in their contributions and vest after five years in the Company's
contributions.  The Company's contributions were approximately $18,000 during
the year ended December 31, 1999.

Employee Stock Ownership Plan (ESOP).  In January 1997, an ESOP was
established covering substantially all employees.  The ESOP borrowed
$2,073,680 from the Holding Company and used the funds to purchase 207,368
shares of the common stock of the Company.  The loan is intended to be repaid
by the ESOP over a period of 15 years principally from the Company's
contributions to the ESOP and dividends on ESOP shares.  The cost of the
shares acquired by the ESOP is considered unearned compensation and, as such,
is recorded as a reduction of the Company's stockholders' equity.  Shares
purchased by the ESOP are held in a suspense account for allocation among
participants as the loan is repaid.  Contributions to the ESOP and shares
released from the suspense account are allocated among participants on the
basis of their compensation in the year of allocation.  Benefits will vest
upon the completion of five years of service.  Forfeitures are reallocated to
remaining plan participants and may reduce the Company's contributions.
Benefits may be payable upon retirement, death, disability, or separation from
service.

Compensation expense is recorded equal to the fair value of shares held by the
ESOP which are deemed committed to be released.  Shares are committed to be
released on a straight-line basis over 15 years, which is the basis for the
annual allocation of ESOP shares to participants.  For the years ended
December 31, 1999 and 1998, ESOP principal and interest payments of
approximately $293,000 and $300,000, respectively, were funded by Empire and
Dime contributions of approximately $212,000 and $234,000, respectively, to
the ESOP.  The remainder of the ESOP payments were funded by dividends on ESOP
shares.  During each of the years ended December 31, 1999 and 1998, 13,824 and
13,825 shares, respectively, were committed to be released to participant
accounts and 5,963 allocated shares were distributed from the ESOP during the
year ended December 31, 1999.  The fair value of the remaining shares to be
released in future years was approximately $1,860,000 at December 31, 1999.
Compensation expense relating to the ESOP shares was $155,067 and $211,611 for
the years ended December 31, 1999 and 1998, respectively.

Employment Contracts.  During 1997, the Company entered into a three-year
employment contract with a senior officer.  This contract was terminated
January 1, 2000 in conjunction with the senior officer's retirement.  In
January 1999, the Company entered into a three-year employment agreement with
the Company's new president and chief executive officer.  In October 1999, the
Company entered into three-year employment agreements with two new officers,
effective January 1, 2000.  These agreements provide severance up to three
times average annual compensation following a change in control of the
Company.

                                       33                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Stock Option Plan.  Effective July 1997, the Company's stockholders approved
the Stock Option Plan.  The terms of the Stock Option Plan provide for the
granting of options to acquire up to 259,210 shares of common stock to
employees, officers and directors of the Company.  The options will vest over
a five year period following the date of the grant of the options.

Changes in shares issuable under options granted for the years ended December
31, 1999 and 1998 are summarized as follows:

                                 Options outstanding     Options exercisable
                                ----------------------  ---------------------
                                             Weighted                Weighted
                                             average                 average
                                             exercise                exercise
                                  Shares      price       Shares     price
                                ---------    --------    --------    --------

Balance at December 31, 1997    $      --          --    $     --          --
Granted                           217,984      16.625          --          --
Canceled                           (1,500)     16.625          --          --
Became exercisable                     --          --      51,842      16.625
                                ---------    --------    --------    --------
Balance at December 31, 1998      216,484      16.625      51,842      16.625
Granted                            27,644      11.625          --          --
Canceled                           (6,000)     16.625          --          --
Became exercisable                     --          --      31,728      16.625
                                ---------    --------    --------    --------
Balance at December 31, 1999      238,128    $ 16.045      83,570    $ 16.625
                                =========    ========    ========    ========

The stock options outstanding at December 31, 1999 consist of the following:

   Number of       Weighted Average      Weighted Average        Options
   Shares           Exercise Price        Remaining Life       Exercisable
-----------        ----------------      -----------------     -----------
   210,484             $ 16.625               8.00 years          83,570
    27,644               11.625               9.56 years              --
-----------        ----------------                            -----------
   238,128             $ 16.045                                   83,570
==========         ================                            ===========

Based on the terms of options granted and using the intrinsic value method, no
compensation cost has been recognized for any stock option grants in the
accompanying financial statements.  Had the Company determined compensation
cost based on the estimated fair value at the grant date for its stock
options, the Company's net income and net income per share for the years ended
December 31, 1999 and 1998 would have been as follows:

                                                  1999           1998
                                             -------------   ------------
Net income:  As reported                     $   1,265,129      1,244,598
             Pro forma                           1,027,481      1,028,336
                                             =============   ============
Basic earnings per share:   As reported      $         .70            .56
                            Pro forma                  .57            .46
                                             =============   ============
Diluted earnings per share: As reported      $         .70            .56
                            Pro forma                  .57            .46
                                             =============   ============

                                       34                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

The pro forma per share weighted-average fair value of stock options granted
during 1999 and 1998 was $3.36 and $5.92, respectively, determined as of the
date of grant using the Black-Scholes option-pricing model with the following
assumptions: 1999 - expected dividend yield of 3.34%, risk-free interest rate
of 4.40% to 5.42%, volatility ratio of .29, and expected life of 10 years;
1998 - expected dividend yield of 2.24%, risk-free interest rate of 5.02%,
volatility ratio of .35, and expected life of 10 years.

Management Recognition and Development Plan (MRDP).  During July 1997, the
Company's stockholders approved the MRDP.  The terms of the MRDP provide for
the award of up to 103,684 of common shares to employees, officers and
directors of the Company.  The shares granted will vest over a five year
period following the date of grant.  During the years ending December 31, 1999
and 1998, the Company granted 7,776 and 77,763 shares, respectively, under
this plan.  Compensation expense, determined by the market value of the shares
at the date of grant, of $184,488 and $193,919 was recognized during the years
ended December 31, 1999 and 1998, respectively, for shares that vested.
Additional compensation expense of $395,027 was recognized during the year
ended December 31, 1998 related to 25,921 shares that vested immediately in
September 1998 due to the death of one of the Company's officers.

(12)  Earnings Per Share

The following table sets forth the compilation of basic and diluted earnings
per share for the years ended December 31:

                                                  1999           1998
                                             -------------   ------------
Average outstanding shares during the
 year on which basic earnings per share
 is calculated:                                  1,796,748      2,215,804
Add: Incremental shares under stock option
      plans
     Incremental shares related to MRDP              2,467            845
Average outstanding shares on which diluted  -------------   ------------
 earnings per share is calculated                1,796,748      2,219,116
Net income applicable to common              =============   ============
 stockholders                                $   1,265,129      1,244,598
Basic earnings per share                     =============   ============
                                             $         .70            .56
                                             =============   ============
Diluted earnings per share                   $         .70            .56
                                             =============   ============

(13)  Regulatory Capital

Empire is required to meet three capital requirements: a tangible capital
requirement equal to not less than 1.5% of tangible assets (as defined in the
regulations); a core capital requirement, comprised of tangible capital
adjusted for supervisory goodwill and other defined factors, equal to not less
than 3.0% of tangible assets; and a risk-based capital requirement equal to at
least 8.0% of all risk-weighted assets.  For risk-weighting, selected assets
are given a risk assignment of 0% to 100%.  Empire's total risk-weighted
assets at December 31, 1999 and 1998 were $53,718,000 and $44,035,000,
respectively.

                                       35                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Empire's compliance with capital requirements at December 31, 1999 and 1998
follows (dollars in thousands):

                                             Minimum to
                                           be adequately
                                            capitalized
                                           under prompt     Minimum to be well
                                            corrective      capitalized under
                                              actions       prompt corrective
                             Actual          provision      actions provision
                       -----------------  ----------------  -----------------
                        Amount   Ratio     Amount   Ratio     Amount   Ratio
                       --------  ------    -------  -----    -------   -----
As of December 31, 1999:
  Total capital        $ 30,153   56.13%   $ 4,297   8.00%   $ 5,372   10.00%
  Tier 1 capital         28,962   53.91         --     --      3,223    6.00
  Tier 1 leverage        28,962   25.65      3,388   3.00      5,646    5.00
  Tangible capital       28,962   25.65      1,694   1.50         --      --
                       ========  ======    =======   ====    =======   =====

As of December 31, 1998:
  Total capital        $ 29,184   66.27%   $ 3,523   8.00%   $ 4,404   10.00%
  Tier 1 capital         27,619   62.72         --     --      2,642    6.00
  Tier 1 leverage        27,619   26.18      3,164   3.00      5,274    5.00
  Tangible capital       27,619   26.18      1,582   1.50         --      --
                       ========  ======    =======   ====    =======   =====

Failure to comply with applicable regulatory capital requirements can result
in capital directives from the director of the Office of Thrift Supervision
(OTS), restrictions on growth and other limitations on a savings bank's
operations.

Consolidated stockholders' equity differs from Empire's tangible, core, and
risk-based capital at December 31 as a result of the following (dollars
rounded to thousands):

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

Consolidated stockholders' equity            $  32,755,000     36,301,000
Holding Company net assets                      (2,722,000)    (6,351,000)
                                             -------------   ------------
  Empire capital                                30,033,000     29,950,000
Non-includable assets of Dime                     (438,000)      (417,000)
Unrealized gains on certain available-
 for-sale securities                              (633,000)    (1,914,000)
                                             -------------   ------------
  Tangible and core capital                     28,962,000     27,619,000
Unrealized gains on certain available-
 for-sale securities                               989,000      1,370,000
Allowance for loan losses                          226,000        220,000
Assets required to be deducted                     (24,000)       (25,000)
                                             -------------   ------------
  Risk-based capital                         $  30,153,000     29,184,000
                                             =============   ============
                                       36                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

In accordance with OTS regulations, at the time of conversion, Empire
restricted a portion of retained earnings by establishing a liquidation
account.  The liquidation account will be maintained for the benefit of
eligible holders who continue to maintain their accounts in Empire after the
conversion.  The liquidation account will be reduced annually to the extent
that eligible account holders have reduced their qualifying deposits.
Subsequent increases will not restore an eligible account holder's interest in
the liquidation account.  In the event of a complete liquidation of Empire,
and only in such an event, each account holder will be entitled to receive a
distribution from the liquidation account in an amount proportionate to the
adjusted qualifying account balances then held.

In addition, savings banks that before and after proposed dividend
distributions meet or exceed their fully phased-in capital requirements, may
make capital distributions with prior notice to the OTS during any calendar
year up to 100% of year-to-date net income plus 50% of the amount in excess of
their fully phased-in capital requirements as of the beginning of the calendar
year.  However, the OTS may impose greater restrictions if an institution is
deemed to be in need of more than normal supervision.  Empire currently
exceeds its fully phased-in capital requirements and has been assessed as
"well-capitalized" under the regulatory guidelines.

(14)  Financial Instruments With Off-Balance-Sheet Risk

The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and involve,
to varying degrees, elements of credit risk.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments.  The Company uses
the same credit policies in making commitments and conditional obligations as
it does for on-balance-sheet instruments.

Financial instruments whose contract amounts represent credit risk are
commitments to extend credit at fixed rates at December 31, 1999 and 1998 of
approximately $2,957,000 and $666,000, respectively and at variable rates at
December 31, 1999 of approximately $2,835,000.  These commitments generally
contain a termination date of 30 days from date the commitment is approved.

(15)  Financial Instruments With Concentration of Credit Risk

At December 31, 1999, approximately $1,130,000 of the Company's loans
receivable are secured by real property located outside of the Company's trade
area consisting of three counties in south central Montana.  Of this amount,
approximately $780,000 are secured by properties located in southern
California.

(16)  Fair Value of Financial Instruments

The Company is required to disclose the fair value for financial instruments,
whether recognized or not recognized on the balance sheet.  A financial
instrument is defined as cash, evidence of an ownership interest in an entity,
or a contract that both imposes a contractual obligation on one entity to
deliver cash or another financial instrument to a second entity.
                                       37                       (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Quoted market prices are used for fair value when available, but do not exist
for some of the Company's financial instruments, primarily loans, time
deposits, notes payable, FHLB advances and other borrowed funds.  The fair
value of these instruments has been derived from the OTS Net Portfolio Value
Model (OTS Model).  The OTS Model primarily employs the static discounted cash
flow method which estimates the fair value of loans, time deposits, notes
payable, FHLB advances and other borrowed funds by discounting the cash flows
the instruments are expected to generate by the yields currently available to
investors on instruments of comparable risk and duration.  Therefore, to
calculate present value, the OTS Model makes assumptions about the size and
timing of expected cash flows and appropriate discount rates.  Different
assumptions could materially change these instruments' estimated values.

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

   Financial Assets.  Due to the liquid nature of the instruments, the
   carrying value of cash and cash equivalents and interest-bearing deposits
   approximates fair value.  For all investment and mortgage-backed
   securities, the fair value is based upon quoted market prices.  The fair
   value of loans receivable was obtained from the OTS Model.  The fair value
   of accrued interest receivable approximates book value as the Company
   expects contractual receipt in the short-term.  The fair value of FHLB
   stock approximates redemption value.

   Financial Liabilities.  The fair value of NOW and demand accounts and
   non-term savings deposits approximates book values as these deposits are
   payable on demand.  The fair value of time deposits, notes payable, FHLB
   advances and other borrowed funds was obtained from the OTS Model.  The
   fair value of accrued interest payable approximates book value as the
   Company expects payment in the short-term.

   Off-Balance Sheet.  Commitments made to extend credit represent commitments
   for loan originations, the majority of which are contracted for immediate
   sale and therefore no fair value adjustment is necessary.  These
   commitments are for loans with terms of less than one year and have
   interest rates which approximate prevailing market rates.

   Limitations.  Fair value estimates are made at a specific point in time,
   based on relevant market information and information about the financial
   instrument.  These estimates do not reflect any premium or discount that
   could result from offering for sale at one time the Company's entire
   holdings of a particular instrument.  Because no market exists for a
   significant portion of the Company's financial instruments, fair value
   estimates are based on judgments regarding comparable market interest
   rates, future expected loss experience, current economic conditions, risk
   characteristics of various financial instruments, and other factors. These
   estimates are subjective in nature and involve uncertainties and matters of
   significant judgment and therefore cannot be determined with precision.
   Changes in assumptions could significantly affect the estimates.

                                       38                         (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Fair value estimates are based on existing on-and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments.  Significant assets and liabilities that are not
considered financial instruments include deferred tax assets and premises and
equipment.  In addition, the tax effect of the difference between the fair
value and carrying value of financial instruments can have a significant
effect on fair value estimates and have not been considered in the estimates
presented herein.

The approximate book value and fair value of the Company's financial
instruments as of December 31, are as follows:

                                        1999                     1998
                             ------------------------  -----------------------
                              Carrying         Fair     Carrying      Fair
                                Value         Value      Value        Value
                             -----------   ----------  ----------  -----------
Financial Assets:
 Cash and due from banks     $ 1,688,000    1,688,000   2,092,000   2,092,000
 Interest-bearing deposits       684,000      684,000   3,061,000   3,061,000
 Investment and mortgage-
  backed securities
  available-for-sale          41,090,000   41,090,000  39,866,000  39,866,000
 Investment and mortgage-
  backed securities held-
  to-maturity                  6,406,000    6,368,000  10,498,000  10,583,000
 Loans receivable, net        59,570,000   58,754,000  49,499,000  50,512,000
 Stock in Federal Home Loan
   Bank of Seattle             1,464,000    1,464,000   1,361,000   1,361,000
 Accrued interest receivable     451,000      451,000     353,000     353,000

Financial Liabilities:
 Deposits                     71,353,000   71,051,000  66,413,000  66,692,000
 FHLB advances, other
  borrowed funds and
  note payable                 9,392,000    9,247,000   4,647,000   4,844,000
 Accrued interest payable        103,000      103,000      93,000      93,000

(17)  Holding Company Information (Condensed)

The summarized financial information for Empire Federal Bancorp, Inc. is
presented below.

Condensed Balance Sheets:
                                                      December 31,
                                             ----------------------------
                                                  1999           1998
                                             -------------   ------------
                   Assets
                   ------
Cash                                         $     107,098        224,576
Loan to Empire                                   2,600,000      6,050,000
Investment in Empire                            30,033,111     29,950,048
Income taxes receivable                             15,008         76,500
                                             -------------   ------------
   Total assets                              $  32,755,217     36,301,124
                                             =============   ============

                                       39                      (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Condensed Balance Sheets, continued:
                                                      December 31,
                                             ----------------------------
                                                  1999           1998
                                             -------------   ------------
            Stockholders' Equity
            --------------------
Stockholders' equity:
  Common stock                               $      25,921         25,921
  Additional paid-in capital                    25,260,408     25,277,770
  Unearned ESOP and MRDP compensation           (2,264,623)    (2,501,054)
  MRDP shares acquired                            (302,011)      (432,215)
  Retained earnings                             17,842,091     17,327,635
  Treasury stock                                (8,439,462)    (5,310,819)
  Accumulated other comprehensive income           632,893      1,913,886
                                             -------------   ------------
   Total stockholders' equity                $  32,755,217     36,301,124
                                             =============   ============

Condensed Statements of Income:

                                                Years Ended December 31,
                                             ----------------------------
                                                  1999           1998
                                             -------------   ------------

Interest income - loan to Empire             $     178,502        572,672
Interest income   loan to ESOP                     154,969        161,717
Compensation expense - ESOP shares                (155,067)      (211,611)
Compensation expense - MRDP shares                (184,488)      (588,946)
Operating expenses                                (138,093)      (140,439)
                                             -------------   ------------
  Loss before equity in undistributed
   earnings of subsidiary and income
   taxes                                          (144,177)      (206,607)
Equity in undistributed earnings of
 subsidiary                                      1,364,056      1,433,705
                                             -------------   ------------
  Income before income taxes                     1,219,879      1,227,098
Income tax benefit                                 (45,250)       (17,500)
                                             -------------   ------------
   Net income                                $   1,265,129      1,244,598
                                             =============   ============

                                       40                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

Condensed Statements of Cash Flows:
                                                Years Ended December 31,
                                             ----------------------------
                                                  1999           1998
                                             -------------   ------------

Cash flows from operating activities:
 Net income                                  $   1,265,129      1,244,598
 Adjustments to reconcile net income to
  net cash provided by operating activities:
   Equity in undistributed earnings of
    subsidiary                                  (1,364,056)    (1,433,705)
   (Increase) decrease in income taxes              61,492        (76,500)
   Decrease in other liabilities                        --        (55,790)
   ESOP compensation                               155,067        211,611
   MRDP compensation expense                       184,488        588,946
                                             -------------   ------------
     Net cash provided by operating activities     302,120        479,160
                                             -------------   ------------
Cash flows from investing activities -
 principal payments from loan to Empire          3,450,000      6,450,000
                                             -------------   ------------
Cash flows from financing activities:
 Cash dividends paid                              (740,955)      (732,330)
 Purchase of stock for MRDP                             --       (926,976)
 Purchase of treasury stock                     (3,128,643)    (5,310,819)
                                             -------------   ------------
     Net cash used in financing activities      (3,869,598)    (6,970,125)
                                             -------------   ------------
Net decrease in cash                              (117,478)       (40,965)
Cash at beginning of year                          224,576        265,541
                                             -------------   ------------
Cash at end of year                          $     107,098        224,576
                                             =============   ============

(18)  Operating Segment Information

As of December 31, 1998, the Company adopted SFAS No. 131, "Financial
Reporting for Segments of a Business Enterprise."  This statement requires
that a public business enterprise report financial and descriptive information
about its reportable operating segments.  According to the statement,
operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance.

The Company evaluates segment performance internally based on its two primary
lines of business, commercial banking and insurance, and thus the operating
segments are so defined.  The operating segment defined as "other" includes
the Holding Company and eliminations of transactions between segments.

The accounting policies of the individual operating segments are the same as
those of the Company described in note 1.  Transactions between operating
segments are primarily conducted at fair value, resulting in profits that are
eliminated for reporting consolidated results of operating.

                                       41                        (Continued)
<PAGE>

              EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
               Notes to Consolidated Financial Statements

The following is a summary of selected operating segment information for the
years ended December 31, 1999 and 1998:

                              Empire        Dime       Other     Consolidated
                           ------------   ---------  ----------  ------------
1999:
 Net interest income       $  4,195,089      10,331     178,502     4,383,922
 Non-interest income            268,594     581,602     (20,944)      829,252
                           ------------   ---------  ----------   -----------
   Total income               4,463,683     591,933     157,558     5,213,174
 Provision for loan losses       17,615          --          --        17,615
 Other noninterest expense    2,234,112     565,497     322,747     3,122,356
                           ------------   ---------  ----------   -----------
   Income before income
    taxes                     2,211,956      26,436    (165,189)    2,073,203
 Income taxes                   847,900       5,424     (45,250)      808,074
                           ------------   ---------  ----------   -----------
   Net income              $  1,364,056      21,012    (119,939)    1,265,129
                           ============   =========  ==========   ===========

 Assets                    $114,580,042     527,458    (580,732)  114,526,768
 Net loans                   59,569,783          --          --    59,569,783
 Deposits                    71,618,076          --    (264,978)   71,353,098
 Stockholders' equity        30,033,111     437,860   2,284,246    32,755,217
                           ============   =========  ==========   ===========

1998:
 Net interest income       $  4,047,706       8,816     572,699     4,629,221
 Non-interest income            297,251     626,905    (51,775)       872,381
                           ------------   ---------  ----------   -----------
   Total income               4,344,957     635,721    520,924      5,501,602
 Provision for loan losses       20,000          --         --         20,000
 Other noninterest expense    1,988,752     567,423    779,306      3,335,481
                           ------------   ---------  ----------   -----------
   Income before income
    taxes                     2,336,205      68,298   (258,382)     2,146,121
 Income taxes                   902,500      16,523    (17,500)       901,523
                           ------------   ---------  ----------   -----------
   Net income              $  1,433,705      51,775    (240,882)    1,244,598
                           ============   =========  ==========   ===========

 Assets                    $109,078,058     518,608    (395,495)  109,201,171
 Net loans                   49,499,156          --          --    49,499,156
 Deposits                    66,692,322          --    (279,725)   66,412,597
 Stockholders' equity        29,950,048     416,848   5,934,228    36,301,124
                           ============   =========  ==========   ===========


                                       42
<PAGE>

                         COMMON STOCK INFORMATION

     The common stock of the Corporation is traded in the over-the counter
market as reported on the Nasdaq National Market under the symbol "EFBC."  As
of March 17, 2000, there were approximately 375 stockholders of record.  The
Corporation estimates that, as of March 20, 2000, there were approximately 739
beneficial owners holding stock in nominee or "street" name.

     The Corporation presently pays quarterly cash dividends on the common
stock, subject to the discretion of the Board of Directors.  Dividend payments
by the Corporation depend primarily on the ability of the Bank to pay
dividends to the Corporation.  Under OTS regulations, the dollar amount of
dividends a federal savings association may pay depends upon the association's
capital surplus position and recent net income.  Generally, if an association
satisfies its regulatory capital requirements, it may make dividend payments
up to the limits prescribed in the OTS regulations.  However, institutions
that have converted to the stock form of ownership may not declare or pay a
dividend on, or repurchase any of, its common stock 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
accordance with OTS regulations and the Bank's Plan of Conversion.  In
addition, earnings of the Bank appropriated to bad debt reserves and deducted
for federal income tax purposes are not available for payment of cash
dividends without payment of taxes at the then current tax rate by the Bank on
the amount removed from the reserves for such distributions.  The Bank does
not contemplate any distribution that would limit the Bank's bad debt
deduction or create federal tax liabilities.

     The stock prices shown below reflect the initial public offering ("IPO")
price and the high and low prices by quarter from January 23, 1997, the date
the Corporation's common stock began trading on the Nasdaq National Market,
through the quarter ended December 31, 1999.


                                          Market Price              Cash
                                          ------------         Dividends Paid
                                         High       Low           Per Share
                                         ----       ----          ---------

 IPO.................................   $10.00     $   --           $  --

 March 31, 1997......................    13.25      12.75              --
 April 1, 1997 - June 30, 1997.......    14.75      12.75            .075
 July 1, 1997 - September 30, 1997...    17.75      14.33            .075
 October 1, 1997 - December 31, 1997.    18.25      15.38            .075
 January 1, 1998 - March 31, 1998....    18.00      16.63            .075
 April 1, 1998 - June 30, 1998.......    17.63      14.75            .080
 July 1, 1998 - September 30, 1998...    15.88      12.50            .080
 October 1, 1998 - December 31, 1998.    14.88      10.50            .085
 January 1, 1999 - March 31, 1999....    14.88      11.63            .100
 April 1, 1999 - June 30, 1999.......    12.38      11.06            .100
 July 1, 1999 - September 30, 1999...    11.88      11.16            .100
 October 1, 1999 - December 31, 1999.    11.75      10.75            .100

                                       43
<PAGE>

                            DIRECTORS  AND OFFICERS
                                     OF
        EMPIRE FEDERAL BANCORP, INC. AND EMPIRE FEDERAL SAVINGS BANK



Directors:

William H. Ruegamer                       Edwin H. Doig
 President and Chief Executive Officer     Retired Registered Pharmacist
 of the Corporation and the Savings Bank   Former owner and manager of
                                           Livingston Drug
Beverly D. Harris
 Vice Chairman  of the Corporation        Sanroe J. Kaisler Jr.
 and the Savings Bank, President           Retired insurance broker and former
 of Dime Service Corporation, the          partner and majority stockholder of
 Savings Bank's wholly-owned               Waite & Company, an insurance
 subsidiary                                company

Walter J. Peterson, Jr.                    Walter R. Sales
 Chairman of the Board of the               Retired rancher and former Montana
Corporation, Vice President of              Legislator
Dime Service Corporation

John R. Boe                                Burton "Tony" Wastcoat
 Retired teacher and vice principal         Owner/ Broker
 of local junior high school in             Coldwell Banker - RCI Realty
 Big Timber, and member
 of Board of Directors of Pioneer
 Medical Center


Officers:

William H. Ruegamer                        Linda M. Alkire
 President and Chief Executive              Chief Financial Officer and
 Officer of the Corporation and the         Treasurer of the Corporation and
 Savings Bank                               the Savings Bank

Ann Worthington
 Secretary of the Corporation
 and the Savings Bank

                                       44
<PAGE>

                             CORPORATE INFORMATION

Corporate Headquarters                       Transfer Agent

123 South Main Street                        Registrar and Transfer Co.
Livingston, Montana                          Cranford, New Jersey

Independent Auditors                         Common Stock

KPMG LLP                                     Traded Over-the-Counter/
Billings, Montana                            National Market System
                                             Nasdaq Symbol: EFBC
General Counsel
                                             10-KSB Information

Huppert and Swindlehurst, P.C.
Livingston, Montana                          A copy of the Form 10-KSB will be
                                             furnished without charge to
                                             stockholders of record upon
                                             written request to the Secretary,
Special Securities Counsel                   Empire Federal Bancorp, Inc., 123
                                             South Main Street, Livingston,
                                             Montana 59047.
Breyer & Associates P.C.
Washington, DC

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

Annual Meeting

    The Annual Meeting of Stockholders will be held on Tuesday, May 23, 2000,
at 12:30 p.m., Mountain Daylight Time, at the Corporation's main office
located at 123 South Main Street, Livingston, Montana.

                                       45
<PAGE>

                                   Exhibit 21

                         Subsidiaries of the Registrant



Parent
------

Empire Federal Bancorp, Inc.

                                     Percentage            Jurisdiction or
Subsidiaries(a)                      of Ownership      State of Incorporation
---------------                      ------------      ----------------------

Empire Federal Savings Bank             100%                United States

The Dime Service Corporation (b)        100%                Montana

---------------------
(a)  The operation of the Corporation's wholly owned subsidiaries are included
     in the Corporation's Financial Statements contained in Item 7 of this
     Report.
(b)  The Dime Service Corporation is the wholly owned subsidiary of Empire
     Federal Savings Bank.

                                       34
<PAGE>

                                  Exhibit 23

                       Independent Accountants' Consent

<PAGE>

KPMG

      P.O. Box 7108
      Billings, MT 59103


                          Independent Accountants' Consent
                          --------------------------------

The Board of Directors and Stockholders
Empire Federal Bancorp, Inc.

We consent to incorporation by reference in the registration statement (No.
333-48511) on Form S-8 of Empire Federal Bancorp, Inc., of our report dated
February 18, 2000 relating to the consolidated balance sheets of Empire
Federal Bancorp, Inc. and subsidiaries as of December 31, 1999 and 1998 and
the related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for the years then ended, which report
appears in the December 31, 1999 annual report on Form 10-KSB of Empire
Federal Bancorp, Inc.


                              /S/ KPMG LLP

Billings, Montana
March 27, 2000

<PAGE>