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|Chairman's Message                                                                      | 1                
|--------------------------------------------------------------------------------------- | -----------------
|Selected Consolidated Financial Information                                             | 3                
|Management's Discussion and Analysis of Financial   Condition and Results of Operations | 5                
|Consolidated Financial Statements                                                       | 18               
|Stockholder Information                                                                 | 48               
|Corporate Information	Inside Back Cover                                                 | Inside Back Cover

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| | /s/  MAUREEN G. PARTYNSKIMaureen G. PartynskiChairman and CEO
| | -------------------------------------------------------------
| |                                                              
| | /s/ MICHAEL R. STEVENSMichael R. Stevens
President           

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|                                   | At December 31,       
|---------------------------------- | ----------------------
|                                   | 2000                  
|                                   | (Dollars in Thousands)
|Selected Financial Condition Data: |                       
|Total assets                       | $276,663              
|Cash and cash equivalents          | 18,504                
|Loans receivable, net(1)           | 154,821               
|Mortgage-backed securities:        |                       
|Held-to-maturity                   | 40,097                
|Available-for-sale                 | 26,356                
|Investment securities:             |                       
|Held-to-maturity                   | 14,802                
|Available-for-sale                 | 10,946                
|FHLB stock                         | 3,497                 
|Note payable                       | 5,250                 
|Deposits                           | 179,424               
|FHLB advances                      | 69,450                
|Stockholders' Equity               | 19,103                

|                                                         | Year EndedDecember 31,
|-------------------------------------------------------- | ----------------------
|                                                         | 2000                  
|                                                         | (Dollars in Thousands)
|Selected Operations Data:                                |                       
|                                                         |                       
|Total interest income                                    | $17,594               
|Total interest expense                                   | 10,155                
|Net interest income                                      | 7,439                 
|Provision for loan losses                                | ---                   
|Net interest income after provision for loan      losses | 7,439                 
|Fees and service charges                                 | 688                   
|Gain (loss) on sales of securities                       | (30)                  
|Gain on sales of loans                                   | 196                   
|Other non-interest income                                | 202                   
|Total non-interest income                                | 1,056                 
|Total non-interest expense                               | 5,673                 
|Income before taxes                                      | 2,822                 
|Provision for income taxes                               | 983                   
|Net income                                               | $  1,839              

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|                                                                                       | Year Ended December 31,
|-------------------------------------------------------------------------------------- | -----------------------
|                                                                                       | 2000                   
|Selected Financial Ratios and Other Data:                                              |                        
|Performance Ratios:                                                                    |                        
|Return on assets (ratio of net income to average total assets)                         | 0.73%                  
|Return on equity (ratio of net income to average equity)(1)                            | 9.04                   
|Interest rate spread information:                                                      |                        
|Average during period                                                                  | 2.83                   
|End of period                                                                          | 2.74                   
|Net interest margin(2)                                                                 | 3.09                   
|Ratio of operating expense to average total assets                                     | 2.26                   
|Ratio of average interest-earning assets to average
      interest-bearing liabilities | 106.20                 
|                                                                                       |                        
|Asset Quality Ratios:                                                                  |                        
|Non-performing assets to total assets at end of period                                 | 0.08                   
|Allowance for loan losses to non-performing loans                                      | 457.08                 
|Allowance for loan losses to gross loans receivable                                    | 0.63                   
|                                                                                       |                        
|Capital Ratios:                                                                        |                        
|Stockholders' equity to total assets at end of period                                  | 6.90                   
|Average stockholders' equity to average assets                                         | 8.11                   
|                                                                                       |                        
|Other data:                                                                            |                        
|Number of full service offices                                                         | 6                      

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|                                   | Year Ended December 31,  
|---------------------------------- | -------------------------
|                                   | 2000                     
|                                   | AverageOutstandingBalance
|                                   | (Dollars in Thousands)   
|                                   |                          
|Loans receivable(1)                | $141,505                 
|Mortgage-backed securities(2)      | 69,803                   
|Securities(2)                      | 16,445                   
|Interest-bearing deposits          | 5,006                    
|Other earning assets(3)            | 8,266                    
|Total earning assets(1)            | 241,025                  
|Non-interest earning assets        | 9,788                    
|Total assets                       | $250,813                 
|                                   |                          
|Interest-Earning Liabilities:      |                          
|Savings deposits                   | $  56,601                
|Demand and NOW                     | 21,896                   
|MMDA                               | 8,067                    
|Certificates of Deposit            | 79,550                   
|Borrowings                         | 60,849                   
|Total interest-bearing liabilities | 226,963                  
|                                   |                          
|Non-interest-bearing liabilities   | 3,514                    
|Total liabilities                  | 230,477                  
|                                   |                          
|Equity                             | 20,336                   
|Total liabilities and equity       | $250,813                 
|                                   |                          
|Net interest/spread                |                          
|Margin                             |                          
|Assets to liabilities              | 106.20%                  

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|                                                                            | At December 31,
|--------------------------------------------------------------------------- | ---------------
|                                                                            | 2000           
|                                                                            |                
|Weighted average yield on:                                                  |                
|Loans receivable(1)                                                         | 7.52%          
|Mortgage-backed securities(2)                                               | 7.23           
|Securities(2)                                                               | 6.79           
|Other interest-earning assets                                               | 6.76           
|Combined weighted average yield         on interest-earning assets          | 7.35           
|                                                                            |                
|Weighted average rate paid on:                                              |                
|Passbook savings                                                            | 2.75           
|NOW                                                                         | 1.50           
|MMDA                                                                        | 3.27           
|Certificates of deposit                                                     | 5.70           
|Borrowings                                                                  | 6.09           
|Combined weighted average rate         paid on interest-bearing liabilities | 4.61           
|                                                                            |                
|Spread                                                                      | 2.74%          

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|                                   | Year Ended December 31,1999 vs. 2000 | Year Ended December 31,1998 vs. 1999
|---------------------------------- | ------------------------------------ | ------------------------------------
|                                   | Increase(Decrease)Due to             | TotalIncrease(Decrease)             
|                                   | Volume                               | Rate                                
|                                   |                                      |                                     
|Interest-earning assets:           |                                      |                                     
|Loans receivable                   | $2,164                               | $   446                             
|Mortgage-backed securities         | (265)                                | 477                                 
|Securities                         | 346                                  | 15                                  
|Interest-bearing deposits          | 2                                    | 1                                   
|Other earning assets               | 362                                  | (28)                                
|Total interest-earning assets      | 2,609                                | 911                                 
|                                   |                                      |                                     
|Interest-bearing liabilities:      |                                      |                                     
|Passbook savings                   | 176                                  | (19)                                
|NOW                                | 63                                   | (66)                                
|MMDA                               | 38                                   | 4                                   
|Certificates of deposit            | 318                                  | 281                                 
|Borrowings                         | 1,558                                | 505                                 
|                                   |                                      |                                     
|Total interest-bearing liabilities | 2,153                                | 705                                 
|                                   |                                      |                                     
|Net interest/spread                | $   456                              | $   206                             

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|Change inInterest Rates(Basis Points) | Net Portfolio Value    | NPV as % PV of Assets
|------------------------------------- | ---------------------- | ---------------------
|$ Amount                              | $ Change               | % Change             
|                                      | (Dollars in Thousands)
|                                      |                        |                      
|+300                                  | 11,111                 | (15,294)             
|+200                                  | 16,714                 | (9,691)              
|+100                                  | 22,003                 | (4,402)              
|---                                   | 26,405                 |                      
|-100                                  | 29,023                 | 2,618                
|-200                                  | 30,843                 | 4,438                
|-300                                  | 33,937                 | 7,532                

|Change inInterest Rates(Basis Points) | Net Portfolio Value    | NPV as % PV of Assets
|------------------------------------- | ---------------------- | ---------------------
|$ Amount                              | $ Change               | % Change             
|                                      | (Dollars in Thousands)
|                                      |                        |                      
|+300                                  | 14,800                 | (10,579)             
|+200                                  | 18,827                 | (6,553)              
|+100                                  | 22,504                 | (2,876)              
|---                                   | 25,380                 |                      
|-100                                  | 27,646                 | 2,267                
|-200                                  | 29,135                 | 3,755                
|-300                                  | 30,075                 | 4,695                

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Crowe, Chizek and Company LLP

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|                                                                                         | 2000     | 1999    
|---------------------------------------------------------------------------------------- | -------- | --------
|ASSETS                                                                                   |          |         
|Cash and due from banks                                                                  | $5,201   | $5,034  
|Interest-bearing deposits in financial institutions                                      | 13,303   | 4,779   
|Cash and cash equivalents                                                                | 18,504   | 9,813   
|                                                                                         |          |         
|Securities available-for-sale                                                            | 37,302   | 32,982  
|Securities held-to-maturity (fair value:
      2000 - $55,230;  1999 - $60,029)          | 54,899   | 61,126  
|Loans receivable, net                                                                    | 154,821  | 116,998 
|Federal Home Loan Bank stock, at cost                                                    | 3,497    | 2,325   
|Accrued interest receivable                                                              | 1,495    | 1,199   
|Intangible assets                                                                        | 1,654    | -       
|Premises and equipment, net                                                              | 3,773    | 3,538   
|Prepaid expenses and other assets                                                        | 718      | 476     
|                                                                                         |          |         
|Total assets                                                                             | $276,663 | $228,457
|                                                                                         |          |         
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                     |          |         
|Deposits                                                                                 | $179,424 | $150,576
|Advances from Federal Home Loan Bank                                                     | 69,450   | 49,500  
|Note payable                                                                             | 5,250    | -       
|Advance payments by borrowers for taxes and insurance                                    | 1,629    | 1,133   
|Accrued interest payable and other liabilities                                           | 1,807    | 1,527   
|Total liabilities                                                                        | 257,560  | 202,736 
|                                                                                         |          |         
|Stockholders' equity                                                                     |          |         
|Common stock, $.01 par value; 2,500,000 shares
      authorized; 2,076,325 shares issued | 21       | 21      
|Additional paid-in capital                                                               | 20,353   | 20,270  
|Unearned ESOP shares                                                                     | (997)    | (1,163) 
|Unearned stock awards                                                                    | (590)    | (859)   
|Treasury stock, at cost                                                                  | (16,083) | (7,227) 
|Retained earnings, substantially restricted                                              | 15,507   | 14,235  
|Accumulated other comprehensive income                                                   | 892      | 444     
|Total equity                                                                             | 19,103   | 25,721  
|                                                                                         |          |         
|Total liabilities and stockholders' equity                                               | $276,663 | $228,457

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|                                                    | 2000    | 1999   | 1998  
|--------------------------------------------------- | ------- | ------ | ------
|Interest income                                     |         |        |       
|Loans                                               | $10,696 | $8,086 | $6,535
|Mortgage-backed and other securities                | 5,052   | 4,840  | 4,519 
|Securities                                          | 1,131   | 765    | 976   
|Other interest-earning assets                       | 715     | 383    | 720   
|Total interest income                               | 17,594  | 14,074 | 12,750
|                                                    |         |        |       
|Interest expense                                    |         |        |       
|Deposits                                            | 6,404   | 5,609  | 5,491 
|Other borrowings                                    | 3,462   | 1,688  | 1,351 
|Note payable                                        | 289     | -      | -     
|Total interest expense                              | 10,155  | 7,297  | 6,842 
|                                                    |         |        |       
|Net interest income                                 | 7,439   | 6,777  | 5,908 
|                                                    |         |        |       
|Provision for loan losses                           | -       | 20     | 21    
|                                                    |         |        |       
|Net interest income after provision for loan losses | 7,439   | 6,757  | 5,887 
|                                                    |         |        |       
|Noninterest income                                  |         |        |       
|Fees and service charges                            | 688     | 500    | 573   
|Gain on sale of loans                               | 196     | -      | -     
|Gain (loss) on sale of securities                   | (30)    | 63     | 19    
|Other                                               | 202     | 148    | 117   
|Total noninterest income                            | 1,056   | 711    | 709   
|                                                    |         |        |       
|Noninterest expense                                 |         |        |       
|Compensation and employee benefits                  | 2,852   | 2,418  | 2,237 
|Occupancy and equipment expenses                    | 1,026   | 920    | 625   
|Data processing                                     | 384     | 264    | 240   
|Federal insurance premiums                          | 37      | 86     | 81    
|Advertising and promotion                           | 202     | 177    | 148   
|Contributions                                       | 90      | 12     | 7     
|Other                                               | 1,082   | 793    | 747   
|Total noninterest expense                           | 5,673   | 4,670  | 4,085 
|                                                    |         |        |       
|Income before provision for income taxes            | 2,822   | 2,798  | 2,511 
|                                                    |         |        |       
|Provision for income taxes                          | 983     | 1,058  | 957   
|                                                    |         |        |       
|Net income                                          | $1,839  | $1,740 | $1,554
|                                                    |         |        |       
|Earnings per share                                  |         |        |       
|Basic and diluted                                   | $1.75   | $1.16  | $.88  

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|                                                                                                                           | CommonStock | AdditionalPaid-inCapital | UnearnedESOPShares | UnearnedStockAwards | TreasuryStock | RetainedEarnings | AccumulatedOtherComprehensiveIncome | TotalStockholders'Equity | ComprehensiveIncome
|-------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------------------ | ------------------ | ------------------- | ------------- | ---------------- | ----------------------------------- | ------------------------ | -------------------
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|Balance at January 1, 1998                                                                                                 | $21         | $20,105                  | $(1,495)           | $(1,382)            | $-            | $12,203          | $975                                | $30,427                  |                    
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|ESOP shares earned                                                                                                         | -           | 103                      | 166                | -                   | -             | -                | -                                   | 269                      |                    
|Stock awards earned                                                                                                        | -           | -                        | -                  | 262                 | -             | -                | -                                   | 262                      |                    
|Cash dividends ($.30 per share)                                                                                            | -           | -                        | -                  | -                   | -             | (550)            | -                                   | (550)                    |                    
|Purchase of treasury stock                                                                                                 | -           | -                        | -                  | -                   | (4,863)       | -                | -                                   | (4,863)                  |                    
|Comprehensive income:                                                                                                      |             |                          |                    |                     |               |                  |                                     |                          |                    
|Net income                                                                                                                 | -           | -                        | -                  | -                   | -             | 1,554            | -                                   | 1,554                    | $1,554             
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|Change in unrealized gain on securities            available-for-sale, net of reclassification  
          and tax effects | -           | -                        | -                  | -                   | -             | -                | 107                                 | 107                      | 107                
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|Total comprehensive income                                                                                                 |             |                          |                    |                     |               |                  |                                     |                          | $1,661             
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|Balance at December 31, 1998                                                                                               | $21         | $20,208                  | $(1,329)           | $(1,120)            | $(4,863)      | $13,207          | $1,082                              | $27,206                  |                    

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|                                                                                                                           | CommonStock | AdditionalPaid-inCapital | UnearnedESOPShares | UnearnedStockAwards | TreasuryStock | RetainedEarnings | AccumulatedOtherComprehensiveIncome | TotalStockholders'Equity | ComprehensiveIncome
|-------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------------------ | ------------------ | ------------------- | ------------- | ---------------- | ----------------------------------- | ------------------------ | -------------------
|                                                                                                                          
|Balance at January 1, 1999                                                                                                 | $21         | $20,208                  | $(1,329)           | $(1,120)            | $(4,863)      | $13,207          | $1,082                              | $27,206                  |                    
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|ESOP shares earned                                                                                                         | -           | 62                       | 166                | -                   | -             | -                | -                                   | 228                      |                    
|Stock awards earned                                                                                                        | -           | -                        | -                  | 261                 | -             | -                | -                                   | 261                      |                    
|Cash dividends ($.38 per share)                                                                                            | -           | -                        | -                  | -                   | -             | (712)            | -                                   | (712)                    |                    
|Purchase of treasury stock                                                                                                 | -           | -                        | -                  | -                   | (2,364)       | -                | -                                   | (2,364)                  |                    
|Comprehensive income:                                                                                                      |             |                          |                    |                     |               |                  |                                     |                          |                    
|Net income                                                                                                                 | -           | -                        | -                  | -                   | -             | 1,740            | -                                   | 1,740                    | $ 1,740            
|Change in unrealized gain on            securities available-for-sale,       
     net of reclassification and tax effects | -           | -                        | -                  | -                   | -             | -                | (638)                               | (638)                    | (638)              
|Total comprehensive income                                                                                                 |             |                          |                    |                     |               |                  |                                     |                          | $ 1,102            
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|Balance at December 31, 1999                                                                                               | 21          | 20,270                   | (1,163)            | (859)               | (7,227)       | 14,235           | 444                                 | 25,721                   |                    
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|ESOP shares earned                                                                                                         | -           | 83                       | 166                | -                   | -             | -                | -                                   | 249                      |                    
|Stock awards earned                                                                                                        | -           | -                        | -                  | 269                 | -             | -                | -                                   | 269                      |                    
|Cash dividends ($.46 per share)                                                                                            | -           | -                        | -                  | -                   | -             | (567)            | -                                   | (567)                    |                    
|Purchase of treasury stock                                                                                                 | -           | -                        | -                  | -                   | (8,856)       | -                | -                                   | (8,856)                  |                    
|Comprehensive income:                                                                                                      |             |                          |                    |                     |               |                  |                                     |                          |                    
|Net income                                                                                                                 | -           | -                        | -                  | -                   | -             | 1,839            | -                                   | 1,839                    | $ 1,839            
|Change in unrealized gain on            securities available-for-sale,            net
of reclassification and  tax effects | -           | -                        | -                  | -                   | -             | -                | 448                                 | 448                      | 448                
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|Total comprehensive income                                                                                                 |             |                          |                    |                     |               |                  |                                     |                          | $2,287             
|                                                                                                                           |             |                          |                    |                     |               |                  |                                     |                          |                    
|Balance at December 31, 2000                                                                                               | $ 21        | $ 20,353                 | $(997)             | $(590)              | $(16,083)     | $15,507          | $ 892                               | $19,103                  |                    

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|                                                                                              | 2000     | 1999     | 1998    
|--------------------------------------------------------------------------------------------- | -------- | -------- | --------
|Cash flows from operating activities                                                          |          |          |         
|Net income                                                                                    | $1,839   | $1,740   | $1,554  
|Adjustments to reconcile net income to net cash       provided by operating activities        |          |          |         
|Depreciation and amortization                                                                 | 434      | 219      | 123     
|Amortization of premiums and discounts on securities, net                                     | 21       | 223      | 375     
|Net (gain) loss on sale of securities                                                         | 30       | (63)     | (19)    
|Provision for loan losses                                                                     | -        | 20       | 21      
|Change in deferred income taxes                                                               | 333      | 183      | 59      
|ESOP compensation expense                                                                     | 249      | 228      | 269     
|Stock awards expense                                                                          | 269      | 261      | 262     
|Net gain on sale of loans                                                                     | (196)    | -        | -       
|FHLB stock dividends                                                                          | (183)    | -        | -       
|Net change in accrued interest receivable                                                     | (36)     | (267)    | (28)    
|Net change in accrued interest payable and other liabilities                                  | (361)    | (43)     | (247)   
|Increase in net deferred loan costs                                                           | (120)    | (124)    | (122)   
|Net change in other assets                                                                    | (71)     | 204      | (402)   
|Net cash provided by operating activities                                                     | 2,208    | 2,581    | 1,845   
|                                                                                              |          |          |         
|Cash flows from investing activities                                                          |          |          |         
|Midwest Savings Bank acquisition, net of cash and cash equivalents       (Note 2)             | (728)    | -        | -       
|Purchase of securities available-for-sale                                                     | (11,049) | (15,227) | (11,197)
|Proceeds from sales of securities available-for-sale                                          | 3,712    | 2,839    | 3,162   
|Principal payments on mortgage-backed securities and collateralized mortgage      obligations | 12,451   | 24,766   | 32,017  
|Purchase of securities held-to-maturity                                                       | -        | (23,958) | (56,629)
|Proceeds from maturities and calls of securities                                              | 172      | 5,395    | 24,459  
|Purchase of FHLB stock                                                                        | (124)    | (475)    | (863)   
|Proceeds from sale of loans                                                                   | 11,070   | -        | -       
|Net increase in loans                                                                         | (9,664)  | (14,917) | (25,717)
|Property and equipment expenditures                                                           | (92)     | (190)    | (1,591) 
|Net cash provided by (used in) investing activities                                           | 5,748    | (21,767) | (36,359)
|                                                                                              |          |          |         
|Cash flows from financing activities                                                          |          |          |         
|Net change in deposits                                                                        | 662      | 7,427    | 12,191  
|Increase in advance payments by borrowers for taxes       and insurance                       | 496      | 58       | 271     
|Note payable                                                                                  | 5,250    | -        | -       
|Borrowings from FHLB                                                                          | 33,000   | 35,500   | 42,000  
|Repayments of FHLB advances                                                                   | (29,250) | (17,000) | (22,000)
|Purchase of treasury stock                                                                    | (8,856)  | (2,364)  | (6,245) 
|Dividends paid                                                                                | (567)    | (658)    | (550)   
|Net cash provided by financing activities                                                     | 735      | 22,963   | 25,667  
|                                                                                              |          |          |         
|Net change in cash and cash equivalents                                                       | 8,691    | 3,777    | (8,847) 
|                                                                                              |          |          |         
|Cash and cash equivalents at beginning of year                                                | 9,813    | 6,036    | 14,883  
|                                                                                              |          |          |         
|Cash and cash equivalents at end of year                                                      | $18,504  | $9,813   | $6,036  
|                                                                                              |          |          |         
|Supplemental disclosures of cash flow information                                             |          |          |         
|Cash paid during the year for                                                                 |          |          |         
|Interest                                                                                      | $9,866   | $7,213   | $6,751  
|Income taxes                                                                                  | 799      | 836      | 865     

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|                                     | 2000   | 1999   | 1998  
|------------------------------------ | ------ | ------ | ------
|                                     |        |        |       
|Net interest income                  | $7,988 | $8,211 | $7,358
|Total income                         | 20,093 | 18,221 | 16,846
|Net income                           | 1,764  | 1,533  | 1,673 
|Basic and diluted earnings per share | 1.68   | 1.02   | .94   

|                                    | December 31, 2000
|----------------------------------- | -----------------
|                                    | Amortized        
|Securities available-for-sale       |                  
|U.S. government agencies            | $1,000           
|FHLMC stock                         | 2,520            
|FNMA stock                          | 5,494            
|FHLMC certificates                  | 1,893            
|FNMA certificates                   | 2,091            
|Collateralized mortgage obligations | 22,369           
|Other equity securities             | 473              
|                                    | $35,840          
|Securities held-to-maturity         |                  
|U.S. government agencies            | $14,802          
|GNMA certificates                   | 15,585           
|FHLMC certificates                  | 7,060            
|FNMA certificates                   | 11,536           
|Collateralized mortgage obligations | 5,916            
|                                    |                  
|                                    | $54,899          

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|                                    | December 31, 1999
|----------------------------------- | -----------------
|                                    | Amortized        
|Securities available-for-sale       |                  
|U.S. government agencies            | $1,000           
|FHLMC stock                         | 2,521            
|FHLMC certificates                  | 2,245            
|FNMA certificates                   | 2,622            
|Collateralized mortgage obligations | 23,019           
|Other equity securities             | 847              
|                                    | $32,254          
|Securities held-to-maturity         |                  
|U.S. government agencies            | $15,811          
|GNMA certificates                   | 14,791           
|FHLMC certificates                  | 9,260            
|FNMA certificates                   | 14,396           
|Collateralized mortgage obligations | 6,868            
|                                    |                  
|                                    | $61,126          

|                                                                         | Held-to-Maturity | Available-for-Sale
|------------------------------------------------------------------------ | ---------------- | ------------------
|                                                                         | AmortizedCost    | FairValue         
|Due after one year through five years                                    | $4,342           | $4,362            
|Due after five years through ten years                                   | 7,801            | 7,501             
|Due after ten years or more                                              | 2,659            | 2,760             
|                                                                         | 14,802           | 14,623            
|                                                                        
|FHLMC stock                                                              | -                | -                 
|FNMA stock                                                               | -                | -                 
|Mortgage-backed securities and collateralized
      mortgage obligations | 40,097           | 40,607            
|Other equity securities                                                  | -                | -                 
|                                                                        
|                                                                         | $54,899          | $55,230           

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|                      | For the Year EndedDecember 31,
|--------------------- | ------------------------------
|                      | 2000                          
|Proceeds              | $3,712                        
|Gross realized gains  | 115                           
|Gross realized losses | (145)                         

|                                         | December 31
|---------------------------------------- | -----------
|                                         | 2000       
|First mortgage loans                    
|Secured by one-to-four-family residences | $123,016   
|Loans held for sale                      | 356        
|Secured by multi-family                  | 24,430     
|Secured by commercial real estate        | 430        
|                                         | 148,232    
|Less net deferred loan origination costs | (913)      
|Total first mortgage loans               | 149,145    
|                                         |            
|Consumer and other loans                 |            
|Home equity loans                        | 6,137      
|Loans on deposits                        | 150        
|Automobile loans                         | 358        
|Total consumer and other loans           | 6,645      
|Less allowance for loan losses           | 969        
|                                         | $154,821   

---

---

---

|Balance at December 31, 1999             | $804  
|---------------------------------------- | ------
|New loans, extensions, and modifications | 541   
|Repayments                               | (49)  
|Balance at December 31, 2000             | $1,296

---

---

---

|                             | For the Year EndedDecember 31,
|---------------------------- | ------------------------------
|                             | 2000                          
|Balance at beginning of year | $795                          
|Allowance acquired           | 174                           
|Provision charged to income  | -                             
|Charge-offs                  | -                             
|                             | $969                          

|                                   | December 31,
|---------------------------------- | ------------
|                                   | 2000        
|Land                               | $1,040      
|Building and landscaping           | 2,818       
|Leasehold improvements             | 171         
|Furniture, fixtures, and equipment | 1,332       
|Total cost                         | 5,361       
|Accumulated depreciation           | (1,588)     
|                                   | $3,773      

---

---

---

|2001                | $70,932
|------------------- | -------
|2002                | 10,251 
|2003                | 2,060  
|2004                | 1,055  
|2005 and thereafter | 956    
|                    |        
|                    | $85,254

|                                                  | December 31,       
|------------------------------------------------- | -------------------
|                                                  | 2000               
|                                                  | WeightedAverageRate
|                                                  |                    
|Advances from the Federal      Home Loan Bank due |                    
|2000                                              | -%                 
|2001                                              | 6.47               
|2003                                              | 6.28               
|2004                                              | 5.69               
|2005                                              | 6.20               
|2008                                              | 4.95               
|2009                                              | -                  
|2010                                              | 6.31               
|Open line                                         | 6.79               
|                                                  |                    
|Total                                             | 6.02%              

---

---

---

|         | For the Year EndedDecember 31,
|-------- | ------------------------------
|         | 2000                          
|Current  |                               
|Federal  | $650                          
|State    | -                             
|Deferred | 333                           
|         |                               
|         | $983                          

---

---

---

|                                                                               | For the Year Ended December 31,
|------------------------------------------------------------------------------ | -------------------------------
|                                                                               | 2000                           
|Provision for federal      income taxes computed      at statutory rate of 34% | $959                           
|State income taxes,      net of federal tax       effect and other             | 24                             
|                                                                               | $983                           

|                                                    | December 31,
|--------------------------------------------------- | ------------
|                                                    | 2000        
|Contributions                                       | $220        
|Loans, principally due to allowance for loan losses | 306         
|Net operating loss carryforwards acquired           | 396         
|Other                                               | 29          
|Total deferred tax assets                           | 951         
|                                                    |             
|Unrealized gain on securities available-for-sale    | (570)       
|Purchase accounting adjustments                     | (120)       
|Depreciation                                        | (97)        
|Federal Home Loan Bank stock dividends              | (145)       
|Deferred loan fees                                  | (358)       
|Other                                               | (50)        
|Total deferred tax liabilities                      | (1,340)     
|                                                    |             
|Net deferred tax liabilities                        | $(389)      

---

---

---

|                                                                                     | 2000      | 1999      | 1998     
|------------------------------------------------------------------------------------ | --------- | --------- | ---------
|Basic earnings per share                                                             |           |           |          
|Net income available to common stockholders                                          | $1,839    | $1,740    | $1,554   
|Weighted average common shares outstanding                                           | 1,048,587 | 1,503,112 | 1,764,550
|Basic earnings per share                                                             | $	1.75    | $	1.16    | $	.88    
|Earnings per share assuming dilution                                                 |           |           |          
|Net income available to common stockholders                                          | $1,839    | $1,740    | $1,554   
|Weighted average common shares outstanding                                           | 1,048,587 | 1,503,112 | 1,764,550
|Add dilutive effect of assumed exercises:                                            |           |           |          
|Incentive stock options                                                              | -         | -         | 5,584    
|Stock awards                                                                         | -         | -         | 1,446    
|Weighted average common and dilutive
            potential common shares outstanding | 1,048,587 | 1,503,112 | 1,771,580
|                                                                                     |           |           |          
|Diluted Earnings Per Share                                                           | $	1.75    | $	1.16    | $	.88    

---

---

---

|                                 | 2000    | 1999    | 1998   
|-------------------------------- | ------- | ------- | -------
|Allocated shares                 | 66,443  | 49,832  | 33,221 
|Unallocated shares               | 99,663  | 116,274 | 132,885
|Total ESOP shares                | 166,106 | 166,106 | 166,106
|Fair value of unallocated shares | $	1,689 | $	1,642 | $	2,324

---

---

---

|                                   | 2000    | 1999                          | 1998   
|---------------------------------- | ------- | ----------------------------- | -------
|                                   | Shares  | Weighted-AverageExercisePrice | Shares 
|Outstanding   at beginning of year | 186,716 | $	17.17                       | 182,716
|Granted                            | -       | -                             | 4,000  
|Exercised                          | -       | -                             | -      
|Forfeited                          | -       | -                             | -      
|                                   |         |                               |        
|Outstanding    at end of year      | 186,716 | $	17.17                       | 186,716

|                                                              | 2000      | 1999      | 1998     
|------------------------------------------------------------- | --------- | --------- | ---------
|Options exercisable at end of year                            | 110,432   | 73,088    | 36,544   
|Weighted-average fair value of    options granted during year | -         | $2.93     | -        
|Average remaining option term                                 | 6.9 years | 7.9 years | 8.8 years

|                               | 2000    | 1999    | 1998   
|------------------------------ | ------- | ------- | -------
|Net income as reported         | $	1,839 | $	1,740 | $	1,554
|Pro forma net income           | 1,631   | 1,614   | 1,428  
|Earnings per share as reported |         |         |        
|Basic and diluted              | 1.75    | 1.16    | .88    
|Pro forma earnings per share   |         |         |        
|Basic and diluted              | 1.56    | 1.07    | .81    

---

---

---

|Date of grant                                 | October 12, 1999
|--------------------------------------------- | ----------------
|
|Options granted                               | 4,000           
|
|Estimated fair value stock of options granted | $2.93           
|
|Assumptions used:                             |                 
|
|Risk-free interest rate                       | 5.99%           
|
|Expected option life                          | 10 years        
|
|Expected stock price volatility               | .01             
|
|Expected dividend yield                       | 2.74%           
|

|                         | 2000      | 1999    | 1998    
|------------------------ | --------- | ------- | --------
|Balance at January 1     | 457,762   | 287,384 | -       
|Treasury stock purchases | 578,877   | 170,378 | 370,437 
|Share transferred to MRP | -         | -       | (83,053)
|Balance at December 31   | 1,036,639 | 457,762 | 287,384 

---

---

---

|                                                              | Actual  | Minimum Requiredfor CapitalAdequacy Purposes | Ninimum Requiredto Be WellCapitalizedUnder Prompt CorrectiveAction Regulations
|------------------------------------------------------------- | ------- | -------------------------------------------- | ------------------------------------------------------------------------------
|                                                              | Amount  | Ratio                                        | Amount                                                                        
|2000                                                          |         |                                              |                                                                               
|Total capital (to risk-
            weighted assets)          | $21,144 | 16.8%                                        | $10,085                                                                       
|Tier 1 (core) capital (to risk-
            weighted assets)  | 19,746  | 15.7                                         | 5,043                                                                         
|Tier 1 (core) capital (to adjusted 
            total assets) | 19,746  | 7.2                                          | 10,970                                                                        
|Tangible capital (to tangible assets)                         | 19,746  | 7.2                                          | 4,114                                                                         
|                                                              |         |                                              |                                                                               
|1999                                                          |         |                                              |                                                                               
|Total capital (to risk-
            weighted assets)          | $23,051 | 24.1%                                        | $7,640                                                                        
|Tier 1 (core) capital (to risk-
            weighted assets)  | 21,830  | 22.9                                         | 3,820                                                                         
|Tier 1 (core) capital (to adjusted 
            total assets) | 21,830  | 9.6                                          | 9,055                                                                         
|Tangible capital (to tangible assets)                         | 21,830  | 9.6                                          | 3,396                                                                         

---

---

---

|                                                                               | 2000  | 1999    | 1998 
|------------------------------------------------------------------------------ | ----- | ------- | -----
|Unrealized holding gains and losses on      securities available-for-sale      | $	704 | $	(984) | $	196
|Reclassification adjustments for (gains)       and losses recognized in income | 30    | (63)    | (19) 
|Net unrealized gains and (losses)                                              | 734   | (1,047) | 177  
|Tax effect                                                                     | 286   | (409)   | 70   
|                                                                               |       |         |      
|Other comprehensive income                                                     | $	448 | $	(638) | $	107

---

---

---

|                                                                          | Contract AmountDecember 31,
|------------------------------------------------------------------------- | ---------------------------
|                                                                          | 2000                       
|Financial instruments whose contract amounts represent 
      credit risk |                            
|
|Commitments to extend credit, including loans in process                  | $	1,801                    
|
|Unused lines of credit                                                    | 2,296                      
|

|2001  | $	120
|----- | -----
|2002  | 69   
|      |      
|Total | $	189

---

---

---

|                                                               | December 31, 2000         | December 31, 1999  
|-------------------------------------------------------------- | ------------------------- | -------------------
|                                                               | ApproximateCarryingAmount | EstimatedFair Value
|Financial Assets                                               |                           |                    
|Cash and cash equivalents                                      | $	18,504                  | $	18,504           
|Securities                                                     | 92,201                    | 92,532             
|Loans receivable, net                                          | 154,821                   | 154,749            
|Federal Home Loan Bank stock                                   | 3,497                     | 3,497              
|Accrued interest receivable                                    | 1,495                     | 1,495              
|Financial Liabilities                                          |                           |                    
|Demand deposits                                                | $(34,337)                 | $(34,337)          
|Savings deposits                                               | (59,833)                  | (59,833)           
|Time deposits                                                  | (85,254)                  | (85,485)           
|Advances from Federal Home Loan Bank                           | (69,450)                  | (69,216)           
|Note payable                                                   | (5,250)                   | (5,250)            
|Advance payments by borrowers for taxes
         and insurance | (1,629)                   | (1,629)            
|Accrued interest payable                                       | (632)                     | (632)              

---

---

---

---

---

---

|                                             | 2000     | 1999    
|-------------------------------------------- | -------- | --------
|ASSETS                                       |          |         
|Cash and cash equivalents                    | $	251    | $	1,409 
|Securities available-for-sale                | 426      | 783     
|ESOP loan                                    | 997      | 1,163   
|Investment in bank subsidiary                | 22,271   | 22,313  
|Accrued interest receivable and other assets | 436      | 273     
|                                             |          |         
|                                             | $	24,381 | $	25,941
|                                             |          |         
|LIABILITIES AND STOCKHOLDERS' EQUITY         |          |         
|Note payable                                 | $	5,250  | $	-     
|Accrued expenses and other liabilities       | 28       | 220     
|Stockholders' equity                         |          |         
|Common stock                                 | 21       | 21      
|Additional paid-in capital                   | 20,353   | 20,270  
|Unearned ESOP shares                         | (997)    | (1,163) 
|Unearned stock awards                        | (590)    | (859)   
|Treasury stock                               | (16,083) | (7,227) 
|Retained earnings                            | 15,507   | 14,235  
|Accumulated other comprehensive income       | 892      | 444     
|                                             |          |         
|                                             | $	24,381 | $	25,941

---

---

---

|                                                                                            | 2000    | 1999    | 1998   
|------------------------------------------------------------------------------------------- | ------- | ------- | -------
|Income                                                                                      |         |         |        
|Dividends from bank subsidiary                                                              | $	3,010 | $	3,000 | $	-    
|Interest income                                                                             | 140     | 148     | 429    
|Loss on sale of securities                                                                  | (24)    | (23)    | (44)   
|Total income                                                                                | 3,126   | 3,125   | 385    
|Expense                                                                                     |         |         |        
|Interest expense                                                                            | 289     | -       | -      
|Other expenses                                                                              | 203     | 118     | 132    
|                                                                                            | 492     | 118     | 132    
|                                                                                            |         |         |        
|Income before income taxes and equity in
         undistributed earnings of bank subsidiary | 2,634   | 3,007   | 253    
|                                                                                            |         |         |        
|Income tax expense (benefit)                                                                | (152)   | (2)     | 82     
|Income before equity in undistributed 
         earnings of bank subsidiary                 | 2,786   | 3,009   | 171    
|Equity in undistributed (overdistributed) 
         earnings of bank subsidiary             | (947)   | (1,269) | 1,383  
|                                                                                            |         |         |        
|Net income                                                                                  | $	1,839 | $	1,740 | $	1,554

---

---

---

|                                                                                           | 2000    | 1999    | 1998   
|------------------------------------------------------------------------------------------ | ------- | ------- | -------
|Operating activities                                                                       |         |         |        
|Net income                                                                                 | $	1,839 | $	1,740 | $	1,554
|Adjustments to reconcile net income to net cash provided 
         by operating activities |         |         |        
|Amortization of discounts and premiums on securities, net                                  | -       | (7)     | (3)    
|Equity in undistributed earnings of bank subsidiary                                        | 947     | 1,269   | (1,383)
|Loss on sale of securities                                                                 | 24      | 23      | 44     
|Change in                                                                                  |         |         |        
|Other assets                                                                               | (200)   | 105     | 11     
|Other liabilities                                                                          | (192)   | (268)   | (302)  
|Net cash
from operating activities                                                         | 2,418   | 2,862   | (79)   
|                                                                                           |         |         |        
|Investing activities                                                                       |         |         |        
|Purchase of securities available-for-sale                                                  | 1       | (1,092) | (765)  
|Purchase of securities held-to-maturity                                                    | -       | -       | (1,834)
|Proceeds from maturities and calls of securities                                           | -       | 1,173   | 4,291  
|Proceeds from sales of securities                                                          | 431     | 750     | 195    
|Payment received on loan to ESOP                                                           | 166     | 166     | 166    
|Capital contribution to subsidiary                                                         | -       | -       | (55)   
|Net cash from investing activities                                                         | 597     | 997     | 1,998  
|                                                                                           |         |         |        
|Financing activities                                                                       |         |         |        
|Proceeds from note payable                                                                 | 5,250   | -       | -      
|Purchase of treasury stock                                                                 | (8,856) | (2,364) | (6,245)
|Dividends paid                                                                             | (567)   | (658)   | (550)  
|Net cash from financing activities                                                         | (4,173) | (3,022) | (6,795)
|Net change in cash and cash equivalents                                                    | (1,158) | 837     | (4,876)
|                                                                                           |         |         |        
|Cash and cash equivalents at beginning of year                                             | 1,409   | 572     | 5,448  
|Cash and cash equivalents at end of year                                                   | $	251   | $	1,409 | $	572  
|Cash paid during the year for interest                                                     | $	261   | $	-     | $	-    

---

---

---

|               | Interest Income | Net InterestIncome | Net Income | Earnings per ShareBasic and FullyDiluted(a)
|-------------- | --------------- | ------------------ | ---------- | -------------------------------------------
|2000           |                 |                    |            |                                            
|First Quarter  | $	3,800         | $	1,700            | $	472      | $	.35                                      
|Second quarter | 4,147           | 1,835              | 381        | .38                                        
|Third quarter  | 4,747           | 1,872              | 401        | .42                                        
|Fourth quarter | 4,900           | 1,962              | 585(b)     | .63(b)                                     
|               |                 |                    |            |                                            
|1999           |                 |                    |            |                                            
|First quarter  | 3,343           | 1,585              | 395        | .25                                        
|Second quarter | 3,389           | 1,650              | 412        | .26                                        
|Third quarter  | 3,518           | 1,715              | 426        | .28                                        
|Fourth quarter | 3,824           | 1,827              | 507        | .35                                        

---

---

|               | HIGH    | LOW     | DIVIDENDS
|-------------- | ------- | ------- | ---------
|FISCAL 1998    |         |         |          
|First Quarter  | $19.000 | $17.000 | $.07     
|Second Quarter | $19.000 | $17.375 | $.07     
|Third Quarter  | $18.000 | $13.375 | $.08     
|Fourth Quarter | $14.750 | $13.125 | $.08     
|               |         |         |          
|FISCAL 1999    |         |         |          
|First Quarter  | $13.750 | $12.625 | $.09     
|Second Quarter | $14.000 | $13.000 | $.09     
|Third Quarter  | $14.250 | $13.500 | $.10     
|Fourth Quarter | $14.500 | $12.875 | $.10     
|               |         |         |          
|FISCAL 2000    |         |         |          
|First Quarter  | 15.375  | 10.875  | $.11     
|Second Quarter | 15.563  | 12.750  | $.11     
|Third Quarter  | 16.188  | 14.813  | $.12     
|Fourth Quarter | 17.000  | 15.375  | $.12     

|STOCKHOLDERS AND GENERAL INQUIRIES                                                                                    | TRANSFER AGENT                                                                
|--------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------
|                                                                                                                      |                                                                               
|Rosanne M. BelczakHemlock Federal Financial Corporation5700 West 159th StreetOak Forest, Illinois 60422(708) 687-9400 | Registrar and Transfer Co.10 Commerce DriveCranford, NJ  070161-(800) 368-5948
|                                                                                                                      |                                                                               

---

|Hemlock Federal Financial Corporation       | Hemlock Federal Bank           
|------------------------------------------- | -------------------------------
|Board of Directors                          | Officers                       
|Maureen G. Partynski, Chairman              | Maureen G. Partynski           
|Michael R. Stevens                          | Chairman and CEO               
|Rosanne M. Pastorek-Belczak, Secretary      | Michael R. Stevens             
|Kenneth J. Bazarnik                         | President                      
|Frank A. Bucz                               | Jean Thornton                  
|G. Gerald Schiera                           | Vice-President, Controller     
|Donald L. Manprisio                         | Neil Christensen               
|                                            | Vice-President, Lending        
|                                            | Rosanne M. Belczak             
|                                            | Vice-President, Secretary      
|                                            | Rhonda Nisbet                  
|                                            | Vice-President, Operations     
|Hemlock Federal Bank for Savings Locations:
|Main Office:                                |                                
|5700 W. 159th St.                           | 15730 W. 127th St.             
|Oak Forest, Illinois 60452   708-687-9400   | Lemont, Illinois 60439         
|                                            |                                
|8855 S. Ridgeland Ave.                      | 324 Commons Dr.                
|                                            |                                
|Oak Lawn, Illinois 60453                    | Bolingbrook, Illinois  60440   
|                                            |                                
|4636 S. Damen Ave.                          | 3030 W. Cermak Ave.            
|Chicago, Illinois 60609                     | Chicago, Illinois  60623       
|                                            |                                
|                                            |                                
|Independent Auditors                        | Special Counsel                
|                                            |                                
|Crowe, Chizek and Company LLP               | Silver, Freedman & Taff, L.L.P.
|One Mid America Plaza                       | 1100 New York Avenue, N.W.     
|Oak Brook, Illinois  60552                  | 7th Floor                      
|                                            | Washington, D.C.  20005