<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the Fiscal Year Ended December 31, 1999
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from ________________ to ________________

                         Commission File Number 0-23063

                        FIRST SECURITYFED FINANCIAL, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

     Delaware                                                     36-4177515
--------------------------------------------------------------------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                           Identification Number)


936 North Western Avenue, Chicago, Illinois                            60622
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                            Zip Code

       Registrant's telephone number, including area code: (773) 772-4500
                              ________________________

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None
                                     ------

           Securities Registered Pursuant to Section 12(g) of the Act:

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

     Indicate  by check  mark  whether  the  Registrant  (1) filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant was required to file such reports),  and (2) has been subject to such
requirements for the past 90 days. YES X NO .

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be  contained,  to the best of  Registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X ]

     As of February 7, 2000, the Registrant had  approximately  5,428,640 shares
of Common Stock issued and outstanding.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  Registrant,  computed by  reference to the closng price of such stock as of
February  7, 2000 was $52.1  million.  (The  exclusion  from such  amount of the
market  value of the shares owned by any person shall not be deemed an admission
by the Registrant that such person is an affiliate of the Registrant.)

                       DOCUMENTS INCORPORATED BY REFERENCE

 PART II of Form 10-K - Annual Report to Stockholders for the fiscal year ended
                               December 31, 1999.

PART III of Form 10-K - Proxy Statementfor 1999 Annual Meeting of Stockholders.

                                        1

<PAGE>



FORWARD-LOOKING STATEMENTS

     First SecurityFed  Financial,  Inc. ("First SecurityFed" or the "Company"),
and its  wholly-owned  subsidiary,  First Security  Federal Savings Bank ("First
Security"  or  the  "Bank"),  may  from  time  to  time  make  written  or  oral
"forward-looking statements," including statements contained in its filings with
the Securities and Exchange Commission.  These forward-looking statements may be
included in this Annual  Report on Form 10-KSB and the exhibits  attached to it,
in First  SecurityFed's  reports to  shareholders  and in other  communications,
which are made in good faith by us pursuant to the "safe  harbor"  provisions of
the Private Securities Litigation Reform Act of 1995.

     These  forward-looking  statements  include  statements  about our beliefs,
plans, objectives, goals, expectations, anticipations, estimates and intentions,
that are  subject to  significant  risks and  uncertainties,  and are subject to
change based on various factors, some of which are beyond our control. The words
"may",  "could",  "should",   "would",  "believe",   "anticipate",   "estimate",
"expect",  "intend",  "plan" and similar  expressions  are  intended to identify
forward-looking statements. The following factors, among others, could cause our
financial   performance  to  differ  materially  from  the  plans,   objectives,
expectations,   estimates  and  intentions   expressed  in  the  forward-looking
statements:

     o    the strength of the United States economy in general and the strength
          of the local economies  in which we conduct  operations;
     o    the effects of, and changes in, trade, monetary and fiscal policies
          and laws, including interest rate policies of the Federal Reserve
          Board;
     o    inflation, interest rate,  market and monetary fluctuations;
     o    the timely development of and acceptance of our new products and
          services and the  perceived  overall  value of these  products and
          services by users,  including  the  features,  pricing  and quality
          compared to competitors' products and services;
     o    the willingness of users to substitute our products and services for
          products and  services of our  competitors;
     o    our success in gaining regulatory approval of our products and
          services, when required;
     o    the impact of changes in financial services' laws and regulations
          (including laws concerning taxes, banking, securities and insurance);
     o    the impact of technological changes;
     o    acquisitions;
     o    changes in consumer spending and saving  habits; and
     o    our success at managing the risks involved in the foregoing.

     The list of  important  factors  stated above is not  exclusive.  We do 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 First  SecurityFed  or First
Security.



                                        2

<PAGE>



                                     PART I

Item 1.  Business

General

     First  SecurityFed,  is a Delaware  corporation  that was formed in 1997 by
First  Security  Federal  Savings Bank for the purpose of becoming a savings and
loan holding company.  The Company owns all of the outstanding  capital stock of
First Security.  Unless the context otherwise requires, all references herein to
the Company include the Company and the Bank on a consolidated basis.

     As a  community-oriented  financial  institution,  First  Security seeks to
serve the financial needs of communities in its ethnically  diverse market area.
The Bank  achieved a significant  penetration  in its market area by engaging in
substantial  community service  activities and targeting  marketing  initiatives
focused on groups within its market area.

     First Security's  business  involves  attracting  deposits from the general
public  and using  such  deposits,  together  with  other  funds,  to  originate
primarily  one- to  four-family  residential  mortgage  loans  and,  to a lesser
extent, multi-family and commercial real estate, consumer and other loans in its
market area. The Bank also invests in  mortgage-backed  and other securities and
other permissible investments.

     The Bank offers a variety of accounts  having a range of interest rates and
terms.  The Bank's  deposits  include  passbook and NOW  accounts,  money market
accounts and certificate  accounts with terms of three months to five years. The
Bank  solicits  deposits  only in its  primary  market  area and does not accept
brokered deposits.

Market Area

     The  Bank's  main  office is located in  Chicago,  Illinois  and its branch
offices are located in Chicago, Illinois, Philadelphia, Pennsylvania and Rolling
Meadows, Illinois.

     The Bank's  Western  Avenue office is located on the near northwest side of
Chicago in the "Ukrainian  Village" community,  a middle-income  community where
the Bank has  focused  its  operations  since 1964.  This  community  is located
approximately  two and one half miles to the  northwest of downtown  Chicago and
approximately three miles west of Lake Michigan. The majority of the community's
many businesses are small and local companies.  Residences  within the community
consist  primarily of two- to four-family flats and single family homes although
there are also  mid-size  apartment  buildings.  Real estate  values within this
community  have risen  sharply over the last ten years as  "gentrification"  has
begun to occur as a result of the community's proximity to downtown Chicago.

     The Bank's Milwaukee Avenue office was opened in 1993 and is located in the
"Norwood Park" neighborhood of Chicago. This community is a stable middle income
area  which also has many  residents  of Eastern  European  descent.  Residences
within the community consist primarily of single family homes as well as two and
three flats and small apartment  buildings.  This area is located  approximately
eight miles northwest of downtown Chicago.

     The Bank's Philadelphia branch was acquired in 1994 through a purchase from
the Resolution  Trust  Corporation.  The branch is located in a moderate  income
neighborhood of  Philadelphia  known as  "Rhawnhurst."  The community is home to
many persons of Eastern European heritage, including new

                                        3

<PAGE>



immigrants.  Residences  within the community consist primarily of single family
row houses and, to a lesser extent, small apartment buildings.

     The  Bank's  suburban  Chicago  branch was opened in 1977 and is located in
Rolling  Meadows,  Illinois,  an upper  middle  class  community  located to the
northwest of Chicago,  near the western border of Palatine,  Illinois.  Over the
last 20 years,  Rolling  Meadows  has  experienced  significant  population  and
commercial growth. However, as a result of competition, the branch's deposit and
loan growth has been modest.

Lending Activities

     General.  The principal lending activity of the Bank is originating for its
portfolio fixed and, to a much lesser extent,  adjustable rate ("ARM")  mortgage
loans secured by one- to four-family  residences located primarily in the Bank's
market area.  First  Security  also  originates  home equity,  multi-family  and
commercial real estate, consumer and other loans in its market area. At December
31, 1999,  the Bank's  loans  receivable,  net totaled  $241.2  million.  See "-
Originations of Loans." Recently,  the Bank added a construction lending program
to its array of lending products.


                                        4

<PAGE>



     The following table sets forth the composition of the Bank's loan portfolio
in dollar amounts and in percentages as of the dates indicated.


<TABLE>


                                               December 31,
                               ----------------------------------------------------------------------------------------------------

                                      1999                 1998               1997                1996                1995
                               ----------------------------------------------------------------------------------------------------

                                Amount    Percent   Amount     Percent  Amount   Percent    Amount     Percent   Amount    Percent
                               ----------------------------------------------------------------------------------------------------
<S>                             <C>       <C>       <C>         <C>     <C>      <C>        <C>         <C>       <C>       <C>

Real Estate Loans:
One-to four-family........    $200,201   80.58%    $182,452    82.23%   $154,819  81.66%     $134,971   81.14%     $117,379   79.83%
Construction . . . . . . .       3,800    1.53        ----       ---         ---    ---           ---     ---           ---     ---
Multi-family..............      13,389    5.39       11,313     5.10      10,999   5.80         9,374    5.63         7,926    5.39
Commercial................      15,304    6.16       11,535     5.20       9,308   4.91         7,647    4.60         7,865    5.35
Mixed use(1)..............       9,084    3.65        9,898     4.46       7,927   4.18         8,004    4.81         7,262    4.94
                               -------   -----     --------   ------     ------- ------        ------   -----        -------   -----
Total real estate loans..      241,778   97.31      215,198    96.99     183,053  96.55       159,996   96.18        140,432  95.51

Consumer loans:
Share loans.............         1,164     .47       1,091     0.49       1,421   0.75         1,174    0.71         1,570    1.07
Automobile..............             3     .01          16     0.01          47   0.01            74    0.04           110    0.07
Home equity.............         5,103    2.05       5,158     2.32       4,602   2.43         3,431    2.06         3,684    2.51
Home improvement........             0     .00          11     0.01           7   0.01            12    0.01            29    0.02
Other...................           410     .16         404     0.18         387   0.21           395    0.24           445    0.30
                             ---------    ----     --------  -------    -------  -----       --------  -------      -------  ------
Total consumer loans...          6,680    2.69        6,680    3.01       6,464   3.41         5,086    3.06         5,838     3.97
Loans secured by leases.             0       0          ---     ---          81   0.04         1,272    0.76           759     0.52
                              -------- --------    --------  -------    -------- ------     --------  --------      -------  ------
Total loans...........         248,458  100.00 %    221,878   100.00%    189,598 100.00%     166,354   100.00%       147,029 100.00%
                                       ========               ======             ======                ======                ======
Less:
Construction Loans in Process    3,467                  ---                  ---                ---                    ----
Deferred fees and discounts..    1,508                1,498                1,511               1,486                 1,578
Allowance for losses.........    2,315                2,069                1,828               1,520                   885
                              --------             ---------            --------            --------                --------
 Total loans receivable, net. $241,168             $218,311             $186,259            $163,348              $144,566
                              =========            =========            ========            =========              =========

</TABLE>

-----------
(1) Mixed use  refers to real  estate on which the  borrower  both  resides  and
conducts a business.




                                        5

<PAGE>



     The following  table shows the  composition of the Bank's loan portfolio by
fixed- and adjustable-rate at the dates indicated.

<TABLE>

                                                                                                          December 31,
                                  ------------------------------------------------------------------------------------------------
                                         1999             1998                1997               1996               1995
                                  ------------------------------------------------------------------------------------------------
                                  Amount   Percent   Amount   Percent   Amount   Percent   Amount   Percent   Amount       Percent
                                  ------------------------------------------------------------------------------------------------
                                                                                                     (Dollars in Thousands)
<S>                                <C>       <C>       <C>       <C>       <C>     <C>      <C>       <C>       <C>          <C>
Fixed-Rate Loans:
Real estate:
 One- to four-family............$193,552    77.90%   $175,246   78.98%  $143,882  75.89%   $118,308   71.12%    $101,015      68.70%
 Multi-family...................  13,389     5.39      11,313    5.10     10,999   5.80       9,169    5.51        7,719       5.25
 Commercial.....................  12,668     5.10       8,625    3.89      7,649   4.04       6,545    3.94        7,370       5.01
 Mixed use(1)...................   9,084     3.65       9,444    4.26      7,446   3.93       7,424    4.46        6,666       4.53
                                --------  --------   --------- -------   ------- -------    --------- ------    ---------    -------
 Total real estate loans........ 228,693    92.04     204,628   92.23    169,976  89.66     141,446   85.03      122,770      83.49
Consumer........................   1,577     0.64       1,522    0.69      1,862   0.98       1,655    1.00        2,154       1.46
Loans secured by leases.........     ---      ---         ---     ---         81   0.04       1,272    0.76          759       0.52
                               ---------  ---------  --------- -------  ----------------    --------- ------   ----------    -------
 Total fixed-rate loans........  230,270    92.68     206,150   92.92    171,919  90.68     144,373   86.79      125,683      85.47

Adjustable-Rate Loans
Real estate:
 One-to-four-family............    6,649     2.68       7,206    3.25     10,937   5.77       16,663  10.02       16,364      11.13
 Multi-family..................      ---      ---         ---     ---        ---    ---          205   0.12          207       0.14
 Commercial....................    2,636     1.06       2,910    1.31      1,659   0.87        1,102   0.66          495       0.34
 Mixed use.....................      ---      ---         454    0.20        481   0.25          580   0.35          596       0.41
 Construction                      3,800     1.53         ---     ---        ---    ---          ---    ---          ---        ---
Consumer.......................    5,103     2.05       5,158    2.32      4,602   2.43        3,431   2.06        3,684       2.51
                               ---------  --------   --------- -------  -------- -------     -------  ------    --------    -------
 Total adjustable-rate loans...   18,188     7.32      15,728    7.08     17,679   9.32       21,981  13.21       21,346      14.53
                               ---------- --------    ---------------    ------- -------     -------- ------    --------     ------
 Total loans...................  248,458   100.00%    221,878  100.00%   189,598 100.00%     166,354 100.00%      147,02     100.00%
                                          ========             ======            ======              ======                  ======

Less:
Construction Loans in Process      3,467                  ---                ---                 ---                 ---
Deferred fees and discounts....    1,508                1,498              1,511               1,486               1,578
Allowance for losses...........    2,315                2,069              1,828               1,520                 885
                               ----------              -------         ---------           ----------           ---------
 Total loans receivable, net... $241,168             $218,311           $186,259            $163,348            $144,566
                               ==========             ========          ========             ========            ========

</TABLE>


                                                                6

<PAGE>



         The following schedule illustrates the interest rate sensitivity of the
Bank's loan portfolio at December 31, 1999.  Mortgages  which have adjustable or
renegotiable interest rates are shown as maturing in the period during which the
final  payment is due.  The  schedule  does not  reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.

<TABLE>


                                             Real Estate
                        -------------------------------------------------------
                                                        Multi-family,
                                                        Construction and
                                                        Commercial Real
                            One-to four family          Estate                       Consumer                      Total
                        ------------------------------------------------------------------------------------------------------------
                                        Weighted                    Weighted                    Weighted                    Weighted
                                        Average                     Average                     Average                     Average
                        Amount          Rate           Amount       Rate        Amount          Rate         Amount         Rate
                        ------------------------------------------------------------------------------------------------------------
                                                                   (Dollars in Thousands)
      Due During
     Years Ending
     December 31,
-----------------------
<S>                     <C>              <C>            <C>          <C>         <C>             <C>            <C>           <C>

2000.................   $ 1,439          7.53           $ 8,258       9.17%$     1,005            9.23%        $ 10,702       8.96%
2001 to 2002...........   1,795          7.74             2,144       9.26         743            8.67            4,682       8.58
2003 and 2004..........  20,523          7.79            17,212       8.94       4,932            8.28           42,667       8.31
2005 to 2009...........  17,394          7.52             3,311       9.47           0               0           20,705       7.83
2010 to 2019...........  78,877          7.98             8,657       8.83           0               0           87,534       8.06
2020 and following.....  80,173          7.73             1,995       8.34           0               0           82,168       7.74
                        --------                     -----------                -------                      ----------
   Total...............$200,201          7.82         $  41,577       8.99     $ 6,680            8.47         $248,458       8.03
                       =========                       =========                ========                      =========

</TABLE>


         The total  amount  of loans due after  December  31,  2000  which  have
predetermined interest rates is $ 219.6 million, while the total amount of loans
due after such date which have floating or adjustable  interest  rates is $ 18.2
million.



                                        7

<PAGE>



     Under federal law, the aggregate amount of loans that the Bank is permitted
to make to any one borrower is generally  limited to 15% of  unimpaired  capital
and surplus  (25% if the  security  for such loan has a "readily  ascertainable"
value or 30% for certain  residential  development loans). At December 31, 1999,
based on the  above,  the  Bank's  regulatory  loans-to-one  borrower  limit was
approximately  $10.5 million.  On the same date, the Bank had no borrowers with
outstanding  balances in excess of this amount.  As of December  31,  1999,  the
largest  dollar amount  outstanding  or committed to be lent to one borrower or,
group  of  related  borrowers,  related  to one  residential  loan  and  several
multi-family  dwelling  loans  totaling $1.8 million  secured by the  borrower's
residence and several multi-family  dwellings located in Chicago,  Illinois.  At
December 31, 1999,  these loans were  performing in accordance with their terms.
As of the same date, there were eight other lending  relationships with carrying
values in excess of $1.0 million.

     All of the Bank's lending is subject to its written underwriting  standards
and to loan origination  procedures.  Decisions on loan applications are made on
the basis of detailed applications and property valuations  (consistent with the
Bank's  appraisal  policy).  The loan  applications  are  designed  primarily to
determine the borrower's  ability to repay and the more significant items on the
application are verified  through use of credit reports,  financial  statements,
tax returns or confirmations.  All mortgage loans currently  originated by First
Security are approved by the loan  committee,  currently  comprised of Directors
Babyk,  Dobrowolsky and Gawryk and Vice President Korb, and ratified by the full
Board of Directors.

     The  Bank  requires  title  insurance  or  other  evidence  of title on its
mortgage  loans,  as well as fire and extended  coverage  casualty  insurance in
amounts  at least  equal to the  principal  amount  of the loan or the  value of
improvements  on the  property,  depending  on the type of loan.  The Bank  also
requires flood insurance to protect the property  securing its interest when the
property is located in a flood plain.

     One- to Four-Family Residential Real Estate Lending. The cornerstone of the
Bank's  lending  program is the  origination  of loans  secured by  mortgages on
owner-occupied one- to four-family  residences.  Historically,  the Bank focused
its  residential  lending  activities  on fixed  rate  loans with terms up to 30
years.  In the 1980s,  in order to reduce the average  term to  repricing of its
assets,  the Bank began to offer 15 year and 10 year fixed rate loans as well as
ARMs (although,  as a result of customer preference,  the Bank's ARM loan volume
has  been  limited).  Substantially  all  of  the  Bank's  one-  to  four-family
residential  mortgage  originations  are  secured by  properties  located in its
market area.  All mortgage loans  currently  originated by the Bank are retained
and serviced by it.

     The Bank currently offers fixed-rate mortgage loans with maturities from 10
to 30 years.  The Bank also offers  fixed rate balloon  products  with a 30 year
amortization  schedule  which are due in three or five  years and  which,  under
certain circumstances,  may be extended for an additional term of up to three or
five years, as applicable.  As of December 31, 1999, the Bank had $17.3 million
of fixed rate loans with original  terms of 10 years or less (most of which were
three or five year  balloon  loans),  $67.2  million  of fixed  rate  loans with
original  terms of 10-15  years and  $109.1  million  of fixed  rate  loans with
original terms of more than 15 years. See "- Originations of Loans."

     The Bank also  originates  fixed rate home equity loans with terms of up to
ten years. These loans are written so that the total balance does not exceed the
lesser of $35,000 or 75% of the  appraised  value of the security  property when
combined with the balance of the first  mortgage lien. At December 31, 1999, the
Bank had $1.8 million of home equity loans,  all of which are  classified in the
tabular data as one- to four-family residential loans.

     The Bank also  offers  ARMs which carry  interest  rates which  adjust at a
margin (generally 250 basis points) over the yield on the One Year and the Three
Year Average Monthly U.S. Treasury Constant Maturity Indexes ("CMT"). Such loans
may carry terms to maturity of up to 30 years. The ARM loans

                                        8

<PAGE>



currently  offered by the Bank provide for a cap on annual interest rate changes
of 200 basis  points and a lifetime  cap  generally of 600 basis points over the
initial  rate.  Initial  interest  rates  offered  on  the  Bank's  ARMs  may be
approximately  100-150  basis  points  below the fully  indexed  rate,  although
borrowers are  qualified at the fully  indexed  rate.  As a result,  the risk of
default on these loans may increase as interest rates increase.  At December 31,
1999, one- to four-family ARMs totaled $6.6 million or 2.68% of the Bank's total
loan portfolio.

     First  Security  will  generally  lend up to 90% of the lesser of the sales
price or appraised  value of the  security  property on owner  occupied  one- to
four-family  loans;  provided,  however,  that  private  mortgage  insurance  is
obtained in an amount  sufficient to reduce the Bank's exposure to not more than
80% of the sales price or appraised  value,  as  applicable.  The  loan-to-value
ratio on non-owner  occupied,  one- to four-family loans is generally 80% of the
lesser of the sales price or appraised value of the security property. Non-owner
occupied  one- to  four-family  loans may pose a  greater  risk to the Bank than
traditional  owner occupied one- to four-family  loans. In underwriting  one- to
four-family  residential  real estate loans,  the Bank  currently  evaluates the
borrower's  ability  to  make  principal,  interest  and  escrow  payments,  the
borrower's  credit history,  the value of the property that will secure the loan
and debt to income ratios.

     Residential  loans  do not  currently  include  prepayment  penalties,  are
non-assumable and do not produce negative amortization.  The Bank's underwriting
practices do not comply in every way with those  required by most  purchasers in
the  secondary  market.  For  instance,  the  Bank,  on  occasion,  will lend to
borrowers  that have  income/debt  service  ratios  below that  required by many
secondary  market  purchasers.  In that event,  the Bank will  require  that the
borrower  have  other  attributes  which  justify  approving  a loan,  such as a
favorable  repayment  record  with the Bank on previous  lending  relationships,
favorable cash flow, a low loan to value ratio or other assets which can be used
as additional collateral.  The Bank has found that non-compliance with secondary
market  standards  at the time of  origination  does not in and of itself  cause
credit  problems  since the Bank has  engaged in this type of  lending  for many
years  and  its  overall   delinquency   experience  on  these  loans  has  been
satisfactory  to date. In addition,  these loans,  once seasoned,  generally are
saleable on the  secondary  market.  Furthermore,  the Bank has found that these
policies  and  procedures  help the  Bank  maintain  and  improve  its  customer
relations, which is critical in the communities the Bank serves.

     While  the  Bank  seeks  to  originate  most  of its  one-  to  four-family
residential  loans in  amounts  which are less  than or equal to the  applicable
Federal  Home  Loan  Mortgage  Corporation  maximum,  the Bank does make one- to
four-family  residential loans in amounts in excess of such maximum.  The Bank's
delinquency  experience on such loans has been similar to its  experience on its
other residential loans.

     The Bank's  residential  mortgage  loans  customarily  include  due-on-sale
clauses  giving  the Bank the  right to  declare  the loan  immediately  due and
payable in the event that,  among other things,  the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid.

     Multi-family  and Commercial Real Estate Lending.  In order to increase the
yield of its loan portfolio and to complement residential lending opportunities,
the Bank  originates  permanent  multi-family  and commercial  real estate loans
secured by properties in its primary market area. At December 31, 1999, the Bank
had multi-family loans totaling $13.4 million, or 5.39% of the Bank's total loan
portfolio, and $15.3 million in commercial real estate loans, representing 6.16%
of the total loan portfolio.

     The Bank's  multi-family loan portfolio consists primarily of loans secured
by sixteen or fewer units. The Bank's commercial real estate loans are primarily
secured by retail stores,  small office  buildings,  store/apartment  complexes,
taverns and store front offices.


                                        9

<PAGE>



     The Bank's multi-family real estate loans generally carry a maximum term of
5 years  and have  fixed  rates,  although  most of these  loans  are five  year
balloons with a 25 year or more amortization schedule. These loans are generally
made  in  amounts  of up to 75% of the  lesser  of the  appraised  value  or the
purchase price of the property.  Most of the Bank's commercial real estate loans
are five year balloon  loans with fixed rates of interest.  Also included in the
Bank's commercial real estate loans are $2.6 million of lines of credit secured
by commercial real estate with floating interest rates tied to the prime rate of
interest.  Commercial  real estate loans are generally made in amounts up to 75%
of the lesser of the appraised value or the purchase price of the property.

     Appraisals on properties  securing  multi-family and commercial real estate
loans in excess of $200,000 are performed by an independent appraiser designated
by the Bank at the time the loan is made.  All  appraisals on  multi-family  and
commercial  real estate  loans are  reviewed by the Bank's  loan  committee.  In
addition,  the  Bank's  underwriting  procedures  require  verification  of  the
borrower's   credit   history,   income  and   financial   statements,   banking
relationships,  references  and income  projections  for the property.  The Bank
obtains personal guarantees on these loans.

     At  December  31,  1999,  the  Bank's  largest  commercial  real  estate or
multi-family  loan  outstanding  totaled  $1,250,000  and  was  secured  by  a
residential  16-unit apartment building located in Chicago,  Illinois.  The loan
was performing in accordance with its terms as of that date.

     Multi-family and commercial real estate loans may present a higher level of
risk than loans secured by one- to four-family residences.  This greater risk is
due to several  factors,  including the  concentration of principal in a limited
number of loans and  borrowers,  the effects of general  economic  conditions on
income  producing  properties  and the increased  difficulty  of evaluating  and
monitoring these types of loans.

     Construction  Lending.  The Bank originates  construction  loans to finance
development of  residential  properties.  Loans are primarily  fixed rate with a
maturity of one year or less.

     The Bank requires  independent  appraisals with loan to value not in excess
of 80%.  Disbursements  are made in increments as construction  progresses,  and
inspections  warrant.  Land loans do not exceed  60% of the  appraised  value or
actual cost.

     As of December 31,1999 the Bank had committed $3.8 million to borrowers for
construction  loans.  As of this same date,  $330,000 of the committed funds had
been disbursed.

     Consumer Lending.  Management believes that offering consumer loan products
helps to expand  the Bank's  customer  base and to create  stronger  ties to its
existing  customer  base. In addition,  because  consumer  loans  generally have
shorter terms to maturity and carry higher rates of interest than do residential
mortgage loans, they can be valuable asset/liability  management tools. The Bank
originates a variety of different types of consumer loans, including home equity
lines of credit,  and deposit account loans for household and personal purposes.
Due to the tax  advantages  to the borrower of home equity lines of credit,  the
Bank has focused its recent consumer lending  activities on home equity lending.
At December 31, 1999 consumer loans totaled $6.7 million or 2.69% of total loans
outstanding.

     Consumer  loan terms vary  according  to the type and value of  collateral,
length of contract and  creditworthiness  of the  borrower.  Other than the home
equity lines of credit,  the Bank's  consumer  loans are made at fixed  interest
rates, with terms of up to five years.

     The  Bank's  home  equity  lines of credit  are  written  so that the total
commitment  amount,  when combined with the balance of the first  mortgage lien,
may not exceed 75% of the appraised value of the

                                       10

<PAGE>



property. These loans are written with fixed terms of up to five years and carry
interest rates that float with the prime rate of interest. At December 31, 1999,
the Bank's home equity  lines of credit  totaled $5.1  million  outstanding,  or
2.05% of the Bank's total loan portfolio.

     The underwriting  standards employed by the Bank for consumer loans include
a determination of the applicant's payment history on other debts and ability to
meet  existing   obligations  and  payments  on  the  proposed  loan.   Although
creditworthiness of the applicant is of primary consideration,  the underwriting
process also  includes a  comparison  of the value of the  security,  if any, in
relation to the proposed loan amount.  Consumer  loans may entail greater credit
risk than do residential  mortgage  loans,  particularly in the case of consumer
loans which are unsecured. In addition,  consumer loan collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
affected by adverse  personal  circumstances.  Furthermore,  the  application of
various federal and state laws,  including  bankruptcy and insolvency  laws, may
limit the amount which can be recovered on such loans.

Originations of Loans

     Real estate loans are originated by First Security's staff through walk-ins
and referrals from existing customers or real estate agents.

     The Bank's ability to originate loans is dependent upon customer demand for
loans in its market  and to a lesser  extent,  customer  service  and  marketing
efforts.  Demand is affected by both the local  economy  and the  interest  rate
environment.  As a result of the strong real estate market in the Bank's primary
market areas and its emphasis on customer  service and community  outreach,  the
Bank has  experienced  significant  loan growth in recent years.  See "-- Market
Area." However,  as a result of consumer demand,  most recent  originations have
carried fixed rather than  adjustable  rates.  Under current  policy,  all loans
originated by First Security are retained in the Bank's portfolio.  See "-- One-
to Four- Family Residential  Lending" and "Management's  Discussion and Analysis
of Financial  Condition and Results of Operations - Asset/Liability  Management"
in the Annual Report attached as Exhibit 13 hereto.

     In  order  to  supplement  loan  originations,  the  Bank  has  acquired  a
substantial  amount  of  mortgage-backed  and other  securities  which are held,
depending   on   the   investment   intent,   in   the   "held-to-maturity"   or
"available-for-sale"  portfolios.  See "Investment  Activities - Mortgage-Backed
and  Related  Securities"  and Note 2 of the Notes to  Consolidated  Financial
Statements  in the Annual Report  attached as Exhibit 13 hereto.  In addition,
depending  on market  conditions,  the Bank may also  consider  the  purchase of
residential loans from other lenders, although it has not done so since 1994.

     As a reflection of the Bank's  emphasis on customer  service,  the Bank has
not sold loans in the past but may do so in the future to manage  interest  rate
risk. Servicing of such loans would be retained by the Bank.

                                       11

<PAGE>



     The  following  table shows the loan  origination,  purchase and  repayment
activities of the Bank for the periods indicated.
<TABLE>


                                                               Year Ended December 31,
                                                    ---------------------------------------------------------------------------

                                                         1999          1998           1997
                                                    -----------------------------------------------------------------------
                                                                   (In Thousands)
<S>                                                      <C>            <C>           <C>

Originations by type:
Adjustable rate:
 Real estate - one- to four-family..............       $2,543         $ 1,791        $ 1,082
Fixed rate:
 Real estate - one- to four-family..............       62,460          68,797         46,207
             - multi-family...............              5,953           5,076          6,066
             - commercial.................              6,096           5,289          1,234
 Non-real estate - consumer.....................        2,451           3,772          3,477
                                                      --------         -------        -------
  Total fixed-rate.........................            76,960          82,934         56,984
                                                      --------         -------        -------
  Total loans originated...................            79,503          84,725         58,066

Principal repayments..............................   ( 56,390)        (52,445)       (34,822)

Increase (decrease) in other items, net...........       (256)           (228)          (333)
                                                   -----------       ---------       --------
  Net increase..............................         $ 22,857         $32,052        $22,911
                                                     ========         =======        =======
</TABLE>



Delinquencies and Non-Performing Assets

     Delinquency Procedures. When a borrower fails to make a required payment on
a loan,  the Bank attempts to cure the  delinquency  by contacting the borrower.
Generally,  Bank personnel  work with the delinquent  borrower on a case by case
basis  to  solve  the  delinquency.  Generally,  a late  notice  is  sent on all
delinquent   loans  followed  by  a  phone  call  after  the  thirtieth  day  of
delinquency.  Additional  written  and  verbal  contacts  may be made  with  the
borrower between 30 and 60 days after the due date. If the loan is contractually
delinquent for 90 days, the Bank may institute  appropriate  action to foreclose
on  the  property.   Generally,  after  120  days,  foreclosure  procedures  are
initiated.  If  foreclosed,  the  property  is sold at  public  sale  and may be
purchased by the Bank.

     Real estate  acquired by First  Security as a result of  foreclosure  or by
deed in lieu of foreclosure is classified as real estate owned until it is sold.
When property is acquired by foreclosure or deed in lieu of  foreclosure,  it is
recorded at the lower of cost or fair value less estimated selling costs.  After
acquisition,  all costs incurred in maintaining the property are expensed. Costs
relating to the  development  and  improvement  of the  property,  however,  are
capitalized.

                                       12

<PAGE>



     The following  table sets forth the Bank's loan  delinquencies  by type, by
amount and by percentage of type at December 31, 1999.

<TABLE>


                                                   Loans Delinquent For:                                    Total Loans Delinquent
                              -----------------------------------------------------------------------------------
                                          60-89 Days                 90 Days and Over                         60-Days-or-More-
                              ------------------------------------------------------------------------------------------------------
                                                      Percent                              Percent                          Percent
                                                      of Loan                              of Loan                          of Loan
                                Number     Amount     Category     Number       Amount     Category     Number     Amount   Category
                              ------------------------------------------------------------------------------------------------------
                                                                                  (Dollars in Thousands)
<S>                               <C>        <C>         <C>        <C>         <C>          <C>          <C>        <C>       <C>

Real Estate:
 One- to four-family........       10        $   787     .39%        9          $   934      .47%          19       $1,721     .86%
 Multi-family...............      ---            ---     ---         1               25      .19            1           25     .19
 Commercial.................        3            282    1.84         2              360     2.35            5          642    4.19
Consumer.....................       4              3     .05         7                8      .12           11           11     .16
                                ------       -------             --------          ------                ------    --------
Total........................      17        $ 1,072     .43%       19          $ 1,327      .53 %         36       $2,399     .96%
                               =======      ========             ========         ========               =======   =========


</TABLE>


                                       13

<PAGE>



     Classification  of Assets.  Federal  regulations  require that each savings
institution  classify  its own  assets  on a  regular  basis.  In  addition,  in
connection  with  examinations of savings  institutions,  OTS and FDIC 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 Bank will sustain some
loss if the deficiencies are not corrected.  Doubtful assets have the weaknesses
of Substandard assets, with the additional  characteristics  that the weaknesses
make collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable,  and there is a high possibility of loss. An
asset classified Loss is considered  uncollectible and of such little value that
continuance  as an  asset  on  the  balance  sheet  of  the  institution  is not
warranted.  Assets classified as Substandard or Doubtful require the institution
to establish prudent general  allowances for loan losses. If an asset or portion
thereof is classified as a loss, the institution charges off such amount against
the loan loss  allowance.  If an  institution  does not agree with an examiner's
classification  of an asset,  it may appeal this  determination  to the District
Director of the OTS.

     On the basis of  management's  review of its assets,  at December 31, 1999,
the Bank had  classified a total of $1.3 million of its loan and other assets as
follows:

<TABLE>

                                                                 At
                                                            December 31,
                                                                1999
                                                        ------------------------
                                                           (In Thousands)

<S>                                                              <C>

Substandard...........................................           $1,327
Doubtful assets.......................................              ---
Loss assets...........................................              ---
                                                                --------
  Total...........................................                1,327
                                                                --------
General loss allowance................................          $ 2,315
                                                                 =======
Specific loss allowance...............................          $   ---
                                                                 =======
Charge-offs, net......................................          $   ---
                                                                 =======
</TABLE>



     First  Security's  classified  assets consist of the  non-performing  loans
referred to below.


                                       14

<PAGE>



     Non-Performing   Assets.  The  table  below  sets  forth  the  amounts  and
categories  of  non-performing  assets in the  Bank's  loan  portfolio.  Accrued
interest  on loans  delinquent  90 days or more is  reversed  out of income  and
credited to an interest  reserve account which offsets the amount of capitalized
interest  in  loans  receivable.  See  Note  3 of the  Notes  to  Consolidated
Financial  Statements  in the Annual  Report  attached as  Exhibit  13 hereto.
Foreclosed assets include assets acquired in settlement of loans.

<TABLE>

                                                                              December 31,
                                              -------------------------------------------------------------------------------------
                                              1999          1998        1997      1996        1995
                                              ------------------------------------------------------------------------------------
                                                                         (Dollars in Thousands)
<S>                                           <C>           <C>       <C>       <C>       <C>


Non-accruing loans:
 One- to four-family.......................   $  ---        $  9      $      9  $     9     $     9
 Commercial real estate....................      ---         ---           ---      ---         ---
                                           ---------    --------      --------  --------    --------
  Total................................         ---            9            9         9           9

Accruing loans delinquent 90 days or more:
 One- to four-family.......................     934          459          614     1,111         971
 Multi-family..............................      25          224          ---       180         367
 Commercial real estate....................     360          313          566       882         749
 Consumer..................................       8            7          194       226         189
                                          ----------    ---------       ------   -------     -------
  Total................................       1,327        1,003        1,374     2,399       2,276

Foreclosed assets:
 One- to four-family.......................      66          ---          ---        40         ---
 Commercial real estate....................     ---          ---          ---       ---         499
                                           ---------    ---------      -------   -------     ------
  Total................................          66          ---          ---        40         499

Non-performing leases......................     ---          ---           81     1,272         ---
                                          ----------    ---------      -------   ------   ---------

Total non-performing assets...............   $1,393        $1,012      $1,464    $3,720      $2,784
                                            =======        ======      ======    ======      ======

Total as a percentage of total assets.....      .37%         0.30%       0.46%     1.44%       1.11%
                                            ========         ====        ====      ====        ====
</TABLE>


     For the years ended December 31, 1998 and December 31, 1999, gross interest
income (less  additions to the interest  reserve) which would have been recorded
had the non-accruing  loans (and accruing loans delinquent 90 days or more) been
current in  accordance  with their  original  terms  amounted to $116,000  and $
96,000,  respectively.  No interest income was recognized on non-accruing  loans
for the years ended December 31, 1999 and December 31, 1998, respectively.

     Other Loans of Concern. In addition to the non-performing  assets set forth
in the table  above,  as of December  31,  1999,  there were no other loans with
respect to which known  information  about the possible  credit  problems of the
borrowers or the cash flows of the security properties have caused management to
have  concerns as to the ability of the  borrowers  to comply with  present loan
repayment  terms and which may result in the future  inclusion  of such items in
the non-performing asset categories.

     Management  considers the Bank's  non-performing and "of concern" assets in
establishing its allowance for loan losses.

                                       15

<PAGE>



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

<TABLE>

                                                                                           Year Ended December 31,
                                                          --------------------------------------------------------------------------
                                                          1999         1998     1997      1996      1995
                                                          --------------------------------------------------------------------------
                                                                       (Dollars in Thousands)
<S>                                                        <C>        <C>       <C>       <C>       <C>
Balance at beginning of period............................  $2,069    $1,828    $1,520    $ 885     $  792

Charge-offs:
 One- to four-family.....................................      ---       ---       ---      ---        ---
 Multi-family............................................      ---       ---       ---      ---        ---
 Commercial real estate..................................      ---       ---       ---       68         28
 Construction or development.............................      ---       ---       ---      ---        ---
 Consumer................................................      ---         5         2        3         15
 Leases..................................................      ---       ---       432      ---        ---
                                                        ----------   --------   ------   -------  ---------
                                                               ---         5       434        71         43

Recoveries:
 One- to four-family.....................................      ---       ---       ---      ---        ---
 Multi-family............................................      ---       ---       ---      ---        ---
 Commercial real estate..................................      ---       ---       ---      ---        ---
 Construction or development.............................      ---       ---       ---      ---        ---
 Consumer................................................      ---       ---         4      ---        ---
 Leases..................................................      ---       ---       ---      ---        ---
                                                        ----------  ---------   -------  -------  ---------
                                                               ---        ---        4      ---        ---

Net (charge-offs) recoveries..............................     ---         (5)    (430)      (71)      (43)
Additions charged to operations...........................     246        246      738       706        136
                                                         ----------   -------   -------    -------   -------
Balance at end of period...............................   $  2,315     $2,069   $1,828    $1,520    $   885
                                                          ========     ======    ======    ======    =======

Ratio of net charge-offs (recoveries) during the
 period to average loans outstanding during the
 period..................................................      ---%       ---%      0.25%   0.05%     (0.03)%
                                                            ======      =====       ====    ====       ====

Ratio of net charge-offs (recoveries) during
 the period to average non-performing assets.............      ---%      0.38%     21.12%   2.15%     (1.88)%
                                                            ========     ====      =====    ====       =====
</TABLE>

<PAGE>

     The  distribution of the Bank's  allowance for losses on loans at the dates
indicated is summarized as follows:

<TABLE>

                                                                                                 December 31,
                     ---------------------------------------------------------------------------------------------------------------
                                   1999                             1998                             1997
                     ---------------------------------------------------------------------------------------------------------------
                                              Percent                           Percent                             Percent
                                             of Loans                           of Loans                            of Loans

                       Amount       Loan     in Each      Amount      Loan      in Each    Amount     Loan          in Each
                       of Loan      Amounts  Category     of Loan     Amounts   Category   of Loan    Amounts       Category
                       Loss         by       of Total     Loss        by        of Total   Loss       by            of Total
                       Allowance    Category Loans        Allowance   Category  Loans      Allowance  Category      Loans
<S>                      <C>       <C>       <C>            <C>       <C>       <C>       <C>        <C>            <C>

One- to four-family..    $ 823     $200,201  80.58%          $736     $182,452  82.23%     $ 572     $154,819      81.66%
Multi-family.........       80       13,389   5.39             83       11,313   5.10         67       10,999       5.80
Multi-family.........
   estate............      607       24,388   9.81            483       21,433   9.66        448       17,235        9.09
Construction or
   development.......       33          333   1.53            ---          ---    ---        ---          ---         ---
Consumer.............      107        6,680   2.69            112        6,680   3.01         80        6,464        3.41
Loans secured by
   leases............      ---          ---    ---            ---          ---    ---         40           81        0.04
                                              ----
Unallocated..........      665          ---    ---            655          ---    ---        621          ---         ---
                    -------------------- ---------    -----------------------------    ------------------------------ ------------
       Total........    $2,315      $244,991 100.00%       $2,069     $221,878 100.00%    $1,828      $189,598        100.00%
                       =======      ======== =======       ======     ======== ======     ======       =======        ======
</TABLE>

<TABLE>
                    ---------------------------------------------------------------------------------------------------------------
                                                  1996                                         1995
                     --------------------------------------------------------------------------------------------------------------
                                                                Percent                                           Percent
                                                                of Loans                                          of Loans
                                 Amount          Loan           in Each       Amount             Loan             in Each
                                 of Loan         Amounts        Category      of Loan            Amounts          Category
                                 Loss            by             of Total      Loss               by               of Total
                                 Allowance       Category       Loans         Allowance          Category         Loans
<S>                           <C>                 <C>          <C>             <C>              <C>              <C>

One- to four-family..              $    335         $134,971     81.14%         $   310           $117,379         79.83%
Multi-family.........                    56            9,374      5.63               56              7,926          5.39
Commercial real...
   estate............                   245           15,651      9.41              199             15,127          10.29
Construction or
   development.......                   ---              ---       ---              ---                ---            ---
Consumer...........                      68            5,086      3.06               70              5,838           3.97
Loans secured by .
   leases............                   318            1,272      0.76               76                759           0.52
Unallocated..........                   478              ---       ---              174                ---            ---
                                       ----            -----      ----             ----               ----            ----
       Total........                 $1,520         $166,354    100.00%            $885           $147,029          100.00%


</TABLE>


<PAGE>



     The allowance for loan losses is  established  through a provision for loan
losses charged to earnings based on management's evaluation of the risk inherent
in its entire loan portfolio.  Such  evaluation,  which includes a review of all
loans of which full collectibility may not be reasonably assured,  considers the
market value of the underlying  collateral,  growth and  composition of the loan
portfolio, delinquency trends, adverse situations that may affect the borrower's
ability to repay,  prevailing economic conditions and other factors that warrant
recognition  in  providing  for  an  adequate  allowance  for  loan  losses.  In
determining the general  reserves under these policies,  historical  charge-offs
and  recoveries,  changes in the mix and levels of the  various  types of loans,
collateral values the current loan portfolio and current economic conditions are
considered.

     While management  believes that it uses the best  information  available to
determine  the  allowance  for  loan  losses,  unforeseen  economic  and  market
conditions could result in adjustments to the allowance for loan losses, and net
earnings could be significantly  affected, if circumstances differ substantially
from the assumptions used in making the final determination.

Securities Activities

     General. Generally, the investment policy of the Company is to invest funds
among categories of investments  based upon the its  asset/liability  management
policies,  investment  quality,  loan and deposit  volume,  liquidity  needs and
performance  objectives.   In  accordance  with  the  Company's  asset/liability
management  policy,  the Company has recently  focused a significant part of its
investment activities on instruments with terms to repricing or maturity of five
years or less and municipal securities which are exempt from federal taxes.

     The Bank must maintain  minimum levels of investments and other assets that
qualify as liquid  assets  under OTS  regulations.  Liquidity  may  increase  or
decrease  depending upon the  availability  of funds and  comparative  yields on
investments  in  relation  to the  return on loans.  Historically,  the Bank has
maintained liquid assets at levels above the minimum requirements imposed by the
OTS regulations and above levels believed  adequate to meet the  requirements of
normal operations,  including potential deposit outflows.  At December 31, 1999,
the Bank's liquidity ratio for regulatory  purposes was 9.19%. See "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Asset/Liability  Management"  and "-  Liquidity  and Capital  Resources"  in the
Annual Report attached as Exhibit 13 hereto.

     The   Company's    securities   are   classified   into   two   categories:
held-to-maturity  and  available-for-sale.  Securities  that the Company has the
positive   intent  and  ability  to  hold  to   maturity   are   classified   as
held-to-maturity  and  reported at  amortized  cost.  All other  securities  not
classified as held-to-maturity are classified as available-for-sale. At December
31,  1999,   the  Company  had  $20.6  million  of   securities   classified  as
available-for-sale.  Available-for-sale  securities  are  reported at fair value
with unrealized gains and losses included,  on an after-tax basis, in a separate
component of shareholders' equity.

     Mortgage-Backed and Related Securities.  In order to supplement its lending
activities and achieve its asset/liability management goals, the Company invests
in mortgage-backed and related  securities.  As of December 31, 1999, all of the
mortgage-backed and related securities owned by the Company are issued,  insured
or guaranteed  either  directly or  indirectly by a federal  agency or are rated
"AAA" by a nationally  recognized  credit rating agency.  However,  it should be
noted that,  while a (direct or  indirect)  federal  guarantee  or a high credit
rating may indicate a high degree of  protection  against  default,  they do not
indicate that the  securities  will be protected from declines in value based on
changes in interest rates or prepayment speeds.


                                       17

<PAGE>



     Consistent with its asset/liability  management  strategy,  at December 31,
1999,  $ 9.4  million,  or 55.4% of the  Company's  mortgage-backed  and related
securities were available-for-sale. In addition, on the same date, $ 9.1 million
or  53.4%  of the  Company's  mortgage-backed  and  related  securities  carried
adjustable rates. Finally, as discussed further below, at December 31, 1999, the
Company had $ 1.2 million of collateralized  mortgage  obligations ("CMOs") with
anticipated  average  lives of five years or less.  For  additional  information
regarding the Company's  mortgage-backed  securities portfolio,  see Note 2 of
the Notes to Consolidated  Financial Statements in the Annual Report attached as
Exhibit 13 hereto.

     The Company's  CMOs and are  securities  derived by  reallocating  the cash
flows from  mortgage-backed  securities  or pools of mortgage  loans in order to
create  multiple  classes,  or  tranches,  of  securities  with coupon rates and
average lives that differ from the underlying  collateral as a whole.  The terms
to maturity of any particular  tranche is dependent upon the prepayment speed of
the  underlying  collateral  as well as the  structure  of the  particular  CMO.
Although  a  significant  proportion  of the  Company's  CMOs are  interests  in
tranches which have been  structured  (through the use of cash flow priority and
"support"  tranches) to give somewhat more predictable cash flows, the cash flow
and hence the value of CMOs is subject to change.

     The  Company  invests  in CMOs as an  alternative  to  mortgage  loans  and
conventional   mortgage-backed   securities  as  part  of  its   asset/liability
management  strategy.  Management believes that, depending on market conditions,
CMOs  may  represent  attractive  investment   alternatives  relative  to  other
investments due to the wide variety of maturity and repayment options available.
In  particular,  the  Company  has from time to time  concluded  that  short and
intermediate  duration CMOs (five year or less average  life) often  represent a
better  combination of rate and duration than  adjustable  rate  mortgage-backed
securities.

     To assess price volatility,  the Federal Financial Institutions Examination
Council  ("FFIEC")  adopted a policy in 1992 which  requires an annual  "stress"
test of mortgage derivative  securities.  This policy, which has been adopted by
the  OTS,   requires  the  Company  to  annually   test  its  CMOs,   and  other
mortgage-related   securities  to  determine   whether  they  are  high-risk  or
nonhigh-risk  securities.  Mortgage  derivative products with an average life or
price volatility in excess of a benchmark 30-year, mortgage-backed, pass-through
security are considered high-risk mortgage securities. Under the policy, savings
institutions may generally only invest in low-risk mortgage  securities in order
to reduce  interest rate risk. In addition,  all high-risk  mortgage  securities
acquired after February 9, 1992 which are classified as high risk at the time of
purchase  must be  carried  in the  institution's  trading  account or as assets
available-for-sale.  At December 31, 1999, the most recent  quarterly test date,
none of the Company's mortgage-backed securities were classified as "high-risk."


                                       18

<PAGE>



         The  following  table  sets  forth  the  composition  of the  Company's
mortgage-backed securities at the dates indicated.
<TABLE>


                                                                                               December 31,
                                                     -------------------------------------------------------------------------------

                                                                1999                    1998                      1997
                                                     -------------------------------------------------------------------------------
                                                      Carrying        % of      Carrying      % of         Carrying    % of
                                                        Value         Total       Value       Total        Value       Total
                                                   -------------------------------------------------------------------------------
                                                                                          (Dollars in Thousands)
<S>                                                 <C>               <C>       <C>            <C>       <C>            <C>

Mortgage-backed securities held-to- maturity:
 GNMA.............................................. $ 3,530             20.77%  $  4,975       20.73%     $  7,781     22.05%
 FNMA..............................................   1,043              6.14      1,474        6.14         2,531      7.17
 FHLMC.............................................   1,846             10.87      2,955       12.31         4,558     12.92
 CMOs..............................................   1,158              6.82      2,183        9.10         3,681     10.44
                                                    --------           ------    --------    --------       -------   -------
                                                      7,577             44.60     11,587       48.28        18,551     52.58
Mortgage-backed securities available-for- sale:
 GNMA..............................................   1,371              8.07      1,983        8.26         2,982      8.45
 FNMA..............................................   3,489             20.54      4,309       17.96         5,605     15.89
 FHLMC.............................................   4,550             26.79      5,907       24.62         7,601     21.54
 CMOs..............................................     ---              ---         211        0.88           545      1.54
                                                   ---------         --------   ---------    -------       -------   --------
                                                      9,410             55.40      12,410      51.72        16,733     47.42
                                                     -------         --------     -------    -------        ------    -------
  Total mortgage-backed securities...............  $ 16,987            100.00%  $  23,997     100.00%    $  35,284    100.00%
                                                   =========           =======     =======    ======       =======     ======

</TABLE>




                                                        19

<PAGE>



         The  following  table  sets  forth the  contractual  maturities  of the
Company's mortgage-backed securities at December 31, 1999.
<TABLE>


                                                                        Due in                                 December 31, 1999
                                          ------------------------------------------------------------------------------------------
                                           6 Months  6 Months   1 to    3 to 5  5 to 10  10 to 20  Over 20     Amortized    Carrying
                                           or Less   to 1 Year  3 Years Years    Years    Years     Years         Cost         Value
                                           -----------------------------------------------------------------------------------------
                                                                          (In Thousands)
<S>                                       <C>       <C>         <C>      <C>    <C>       <C>        <C>         <C>          <C>
Federal Home Loan Mortgage Corporation....$  ---    $ ---       $  98    $ 378  $  716    $2,682     $ 2,713     $ 6,587      $6,396
Federal National Mortgage Association....    ---      ---         ---      358     191     1,975       2,153       4,677       4,532
Government National Mortgage Association.    ---      ---         ---      ---     275     1,107       3,531       4,913       4,901
CMOs .....................................   ---      ---         ---      ---     307        85         766       1,158       1,158
                                          ------    -----       -----    -----   ------  --------    -------      ------      ------
                                             ---
     Total..............................  $  ---    $ ---       $  98    $ 736  $1,489    $5,849     $ 9,163     $17,335    $ 16,987
                                          =======   ======      ======   ====== ========  ========  ========    ========   ========



</TABLE>



                                       20

<PAGE>



     As of December  31,  1999,  the  Company  did not have any  mortgage-backed
securities in excess of 10% of retained earnings except for FNMA, FHLMC and GNMA
issues, amounting to $4.5 million, $6.4 million and $4.9 million, respectively.

     The market values of a portion of the Company's mortgage-backed  securities
held-to-maturity  have been from time to time lower than their carrying  values.
However, for financial reporting purposes, such declines in value are considered
to be temporary in nature since they have been due to changes in interest  rates
rather than credit concerns. See Note 2 of the Notes to Consolidated Financial
Statements in the Annual Report attached as Exhibit 13 hereto.

     The following table shows  mortgage-backed  securities  purchase,  sale and
repayment activities of the Company for the periods indicated.

<TABLE>

                                                        Year Ended December 31,
                                      ------------------------------------------
                                            1999         1998              1997
                                      ------------------------------------------
                                                  (In Thousands)
<S>                                     <C>            <C>            <C>
Purchases:
 Adjustable-rate......................  $      ---     $    ---        $     ---
 Fixed-rate...........................         ---          ---              ---
 CMOs.................................         ---          ---              ---
                                          --------     ---------        --------
  Total purchases.................             ---          ---              ---

Principal repayments.....................   (6,680)     (11,094)         (8,475)
Discount/premium net change.............. (    260)        (116)           (184)
Fair value net change.................... (     70)         (77)            107
                                          ---------  -----------        --------
   Net increase (decrease).........      $  (7,010)    $(11,287)        $(8,552)
                                          =========     ========         =======
</TABLE>


     The Company's holdings of  mortgage-backed  securities are approximately 3%
of the Company's total assets.  Since  pass-through  mortgage-backed  securities
generally carry a yield  approximately  50 to 100 basis points below that of the
corresponding  type of  residential  loan  (due to the  implied  federal  agency
guarantee fee and the retention of a servicing spread by the loan servicer), and
the Company's  CMOs also carry lower yields (due to the implied  federal  agency
guarantee and because such securities tend to have shorter actual durations than
30 year  loans),  in the  event  that the  proportion  of the  Company's  assets
consisting of mortgage-backed  and related securities  increases,  the Company's
asset yields could be somewhat  adversely  affected.  The Company will  evaluate
mortgage-backed  and related  securities  purchases  in the future  based on its
asset/liability   objectives,   market  conditions  and  alternative  investment
opportunities.

     Other  Securities.  In order to complement its lending and  mortgage-backed
securities  activities,  and to increase its holdings of short and  intermediate
term  assets,  the Company  invests in liquid  investments  and in  high-quality
investments,  such as U.S. Treasury and agency obligations. At December 31, 1999
and December 31, 1998, the Company's  securities portfolio totaled $96.5 million
and $60.6 million,  respectively.  At December 31, 1999, the Company did not own
any other  securities  of a single  issuer which  exceeded 10% of the  Company's
retained earnings,  other than federal agency  obligations.  See Note 2 of the
Notes to  Consolidated  Financial  Statements in the Annual  Report  attached as
Exhibit 13 hereto for  additional  information  regarding the Company's  other
securities portfolio.

                                       21

<PAGE>



     The  following  table sets forth the  composition  of the  Company's  other
securities and other earning assets at the dates indicated.
<TABLE>


                                                                                      December 31,
                                              -----------------------------------------------------------------------------------
                                                          1999                1998                    1997
                                              -----------------------------------------------------------------------------------
                                                Carrying      % of     Carrying    % of      Carrying       % of
                                                 Value        Total     Value      Total      Value        Total
                                               -----------------------------------------------------------------------------------
                                                                          (Dollars in Thousands)
<S>                                            <C>            <C>      <C>         <C>       <C>            <C>
Securities held-to-maturity:
  Federal agency obligations....................$ 69,763       72.26%   $41,504     68.47%    $33,562        61.92%
  Municipal bonds...............................  15,568       16.13      5,176      8.54       4,909         9.06
                                                  ------       -----   --------     ------     -------      -------
                                                  85,331       88.39     46,680     77.01      38,471       70.98
Securities available-for sale:
  US government securities......................     335         .35      2,577      4.25       8,014        14.79
  Mutual funds..................................   2,998        3.11      3,164      5.22       3,155         5.82
  Municipal bonds...............................   7,370        7.62      7,679     12.67       3,966         7.32
  Corporate notes...............................     230         .24        242      0.40         250         0.46
  Other equity..................................     279         .29        271      0.45         343         0.63
                                                ---------    -------  ---------    ------     -------       -------
                                                  11,212       11.61     13,933     22.99      15,728        29.02
                                                 --------    --------    ------    ------      ------        ------
       Total securities......................... $96,543      100.00%   $60,613    100.00%    $54,199        100.00%
                                                ========      ======    =======    ======     =======        ======

Other earning assets:
  Interest-earning deposits with banks.......... $ 1,571       38.45%   $ 8,205      41.60%    $ 5,750        22.28%
  FHLB stock....................................   2,315       56.66      2,131      10.80       1,852         7.18
  Federal funds sold............................     200        4.89      9,189      46.59      18,000        69.76
  Time deposit in other financial institutions..    ----         ---        200       1.01         200         0.78
                                                ---------    --------   -------    -------    --------       -------
        Total................................... $ 4,086       100.00%  $19,725     100.00%    $25,802       100.00%
                                                  =======      ======    =======    ======     =======        ======


</TABLE>


                                       22

<PAGE>



     The composition and maturities of the other securities portfolio, excluding
FHLB stock, are indicated in the following table.
<TABLE>


                                                                     December 31, 1999
                                 ---------------------------------------------------------------------------------------------------
                                   Less Than        1 to 5        5 to 10           Over
                                     1 Year         Years          Years          10 years          Total Securities
                                 ---------------------------------------------------------------------------------------------------
                                   Amortized      Amortized      Amortized       Amortized      Amortized         Fair
                                      Cost           Cost           Cost            Cost           Cost           Value
                                 ---------------------------------------------------------------------------------------------------
                                                                   (Dollars in Thousands)

<S>                                <C>            <C>             <C>            <C>           <C>              <C>
US government securities.......    $     ---      $     ---       $    ---           $ 259       $    259          $ 335
Federal agency obligations.....          200         16,375         50,689           2,499         69,763         67,348
Municipal bonds................          200          1,323          2,644          19,207         23,374         22,358
Corporate notes................          ---            250            ---             ---            250            230
                                   ----------       --------     ----------       ---------      ---------      --------
Total securities...............    $     400        $17,948       $ 53,333        $ 21,965        $93,646(1)    $ 90,271
                                    ========        =======       ========        ========        =======       ========
Weighted average yield.........         4.79%          6.20%          6.50%           5.26%          6.14%
                                    ========        =======      =========          =======       =======
</TABLE>


----------------
(1)      Includes $ 84.5 million of callable securities.


     See  Note 2 of  Notes to the  Consolidated  Financial  Statements  in the
Annual Report  attached as Exhibit 13 hereto for a discussion of the Company's
securities portfolio.

Sources of Funds

     General.  The  Bank's  primary  sources  of funds  are  deposits,  payments
(including  prepayments)  of  loan  principal,  interest  earned  on  loans  and
securities,  repayments  of  securities,  borrowings  and  funds  provided  from
operations.

     Deposits.  First Security  offers deposit  accounts  having a wide range of
interest rates and terms.  The Bank's deposits  consist of passbook,  NOW, money
market  and  various  certificate   accounts.   The  Bank  relies  primarily  on
competitive  pricing and customer  service to attract and retain these deposits.
The Bank's  customers may access their  accounts  through any of the Bank's five
offices and five automated  teller machines  ("ATMs").  In addition,  the Bank's
customers may access their accounts through several nationwide ATM networks. The
Bank only  solicits  deposits  in its  market  area and does not  currently  use
brokers to obtain deposits.

     The  Bank  manages  the  pricing  of  its  deposits  in  keeping  with  its
asset/liability management,  profitability and growth objectives. The variety of
deposit  accounts  offered  by the  Bank has  allowed  it to be  competitive  in
obtaining funds and to respond with  flexibility to changes in consumer  demand.
However,  as some customers have become more interest rate  conscious,  the Bank
has become more  susceptible to short-term  fluctuations  in its  certificate of
deposit flows.

     Management  believes that the "core" portion of the Bank's regular savings,
NOW and money market accounts, which amounted to $97.1 million or 40.8% of total
deposits at December  31, 1999,  can have a lower cost and be more  resistant to
interest rate changes (and  competing  non-depository  financial  products) than
certificate accounts. The Bank utilizes customer service, community outreach and
marketing  initiatives  in an effort to build and  maintain  the  volume of such
deposits. However, there can be no assurance as to whether the Bank will be able
to maintain or increase its core deposits in the future.

                                       23

<PAGE>



     The  table  below  sets  forth the  Bank's  deposit  flows for the  periods
indicated.
<TABLE>


                                                   Year Ended December 31,
                                       -----------------------------------------
                                       1999            1998             1997
                                       -----------------------------------------
                                                    (Dollars In Thousands)
<S>                                   <C>            <C>             <C>
Opening balance......................  $ 220,495      $210,100        $ 219,505
Deposits.............................    403,756       373,966          457,063
Withdrawals..........................   (395,294)     (372,758)        (475,811)
Interest credited....................      9,166         9,187            9,343
                                       ----------   -----------         --------

Ending balance.......................   $ 238,123     $220,495         $210,100
                                        =========     =========         ========

Net increase (decrease)..............     $17,628    $  10,395          $(9,405)
                                          =======     =========          =======

Percent increase (decrease)..........        7.99         4.95%           (4.28)%
                                        =========        =====            =====
</TABLE>



     The following table sets forth the dollar amount of savings deposits in the
various types of deposit programs offered by the Bank as of the dates indicated.

<TABLE>

                                                                              December 31,
                                       ------------------------------------------------------------------------
                                              1999                   1998                      1997
                                       -----------------------------------------------------------------------
                                                   Percent                 Percent                    Percent
                                        Amount     of Total      Amount   of Total       Amount       of Total
                                       ------------------------------------------------------------------------
                                                                         (Dollars in Thousands)
<S>
Transactions and Savings              <C>          <C>      <C>             <C>     <C>              <C>
Deposits
Passbook Accounts 3.00%............... $ 75,180     31.6%    $  74,963       34.0%   $  68,572         32.6%
NOW Accounts 2.23%....................   18,281      7.7        16,976        7.7       15,705          7.5
Money Market Accounts 3.06%...........    3,651      1.5         4,524        2.0        4,574          2.2
                                     -----------  ------    ----------     -------      -------       ------

Total Non-Certificates...............    97,112     40.8        96,463       43.7       88,851         42.3

Certificates:
0.00 - 3.99%.........................       ---      ---          226         0.1          ---          ---
4.00 - 5.99%..........................  124,269     52.2      111,820        50.7      108,902         51.8
6.00 - 7.99%........................     16,693      7.0       11,892         5.4       12,347          5.9
8.00 - 9.00%........................         49      ---           94         0.1          ---          ---
                                      ---------   -------   ---------     -------  -----------       -------

Total Certificates..................    141,011     59.2      124,032        56.3      121,249         57.7
                                      ----------  ------      -------      ------     --------        ------

Total Deposits......................  $ 238,123    100.0%    $220,495       100.0%    $210,100         100.0%
                                      =========   ======     ========       =====     ========         =====

</TABLE>

                                       24

<PAGE>



     The  following  table shows rate and  maturity  information  for the Bank's
certificates of deposit as of December 31, 1999.

<TABLE>

                         Less Than     1 to 2        2 to 3       3 to 4        4 to 5
                          1 Year        Years         Years        Years         Years        Total
                       ---------------------------------------------------------------------------------
                                                    (Dollars in Thousands)
<S>                   <C>            <C>          <C>           <C>          <C>            <C>

3.00 - 3.99%..........  $     ---     $    ---       $   ---      $   ---     $     ---      $    ---
4.00 - 4.99%..........     61,862        3,614            82          100           598        66,256
5.00 - 5.99%..........     51,445        2,781         1,899        1,584           304        58,013
6.00 - 6.99%..........      8,127        1,533         1,665          178         3,246        14,749
7.00 - 7.99%..........      1,245            3           696          ---           ---         1,944
8.00 -  8.99%.........        ---          ---           ---          ---            49            49
                       ------------------------------------------------------------------- -------------
                        $ 122,679    $   7,931      $  4,342    $  1,862      $   4,197     $ 141,011
                        ==========   ==========     =========   ==========    ==========     =========

</TABLE>



     The  following  table  indicates the amount of the Bank's  certificates  of
deposit and other deposits by time  remaining  until maturity as of December 31,
1999.

<TABLE>

                                                                        Maturity
                                              ----------------------------------------------------------------------
                                                                Over            Over           Over
                                               3 Months        3 to 6         6 to 12           12
                                               or Less         Months          Months         Months          Total
                                              ----------------------------------------------------------------------
                                                                             (In Thousands)
<S>                                          <C>            <C>             <C>           <C>             <C>
Certificates of deposit less than
$100,000....................................  $ 29,318       $ 22,864        $ 31,691       $ 13,172        $ 97,045
Certificates of deposit $100,000
 or more....................................    10,505         10,928          17,373          5,160          43,966
                                              ---------       --------        --------       --------        --------
     Total certificates of deposit..........  $ 39,823       $ 33,792        $ 49,064       $ 18,332       $ 141,011
                                              =========      =========       ========        ========       =========

</TABLE>


     For  additional   information  regarding  the  composition  of  the  Bank's
deposits,  see Note 7 of the Notes to the Consolidated Financial Statements in
the Annual Report attached as Exhibit 13 hereto.

     Borrowings.  First  Security's  other  available  sources of funds  include
advances from the FHLB of Chicago and other borrowings. The Bank's FHLB advances
to date have  primarily  consisted  of  subsidized  borrowings  to fund  special
housing  programs.  As a member of the FHLB of Chicago,  the Bank is required to
own capital stock in the FHLB of Chicago and is authorized to apply for advances
from the FHLB of Chicago.  Each FHLB credit  program has its own interest  rate,
which may be fixed or variable, and range of maturities. The FHLB of Chicago may
prescribe the acceptable uses for these advances,  as well as limitations on the
size of the  advances  and  repayment  provisions.  See Note 8 of the Notes to
Consolidated  Financial Statements in the Annual Report attached as Exhibit 13
hereto.


                                       25

<PAGE>



     The following  table sets forth the maximum  month-end  balance and average
balance of FHLB advances for the periods indicated.

<TABLE>

                                                                        Year Ended December 31,
                                             -------------------------------------------------------------------------------------
                                                  1999            1998            1997           1996            1995
                                            --------------------------------------------------------------------------------------
                                                                        (Dollars In Thousands)
<S>                                          <C>             <C>             <C>             <C>             <C>
Maximum Balance:
  FHLB Advances.............................   $ 46,300        $29,000         $12,000         $3,000          $4,000

Average Balance:
  FHLB Advances.............................   $ 34,607        $21,667         $ 9,548         $3,000          $3,333

Weighted average interest rate of
  FHLB advances.............................       5.41%          5.10%           5.72%          5.17%           5.25%

</TABLE>


Subsidiary Activities

     As a federally  chartered  savings bank, First Security is permitted by OTS
regulations  to  invest  up to 2% of its  assets  in the  stock of, or loans to,
service corporation subsidiaries,  and may invest an additional 1% of its assets
in service  corporations  where such additional funds are used for inner-city or
community   development   purposes.   In  addition  to  investments  in  service
corporations,  federal  institutions are permitted to invest an unlimited amount
in operating  subsidiaries  engaged solely in activities which a federal savings
association may engage in directly.

     At  December  31,  1999,  First  Security  had  one  wholly  owned  service
corporation,   Western   Security   Service   Corporation   ("Western"   or  the
"Subsidiary").  Western, an Illinois corporation, was incorporated November 1977
for the purpose of offering  customers and members of the general public credit,
life, mortgage and disability insurance.  First Security's investment in Western
was $26,933 as of December 31, 1999.  Western  recognized net income (loss) of $
(1,869)  during the year ended  December 31, 1999 and  ($9,500)  during the year
ended December 31, 1998.

Competition

     First Security  faces strong  competition  both in originating  real estate
loans  and in  attracting  deposits.  Competition  in  originating  loans  comes
primarily  from credit  unions,  mortgage  bankers,  commercial  banks and other
savings  institutions,  which also make loans secured by real estate  located in
the Bank's market area.  First  Security  competes for loans  principally on the
basis of the  interest  rates  and loan fees it  charges,  the types of loans it
originates,  community  outreach  and the  quality of  services  it  provides to
borrowers.

     Competition   for  those  deposits  is  principally   from  credit  unions,
commercial banks, mutual funds,  securities firms and other savings institutions
located in the same  communities.  The ability of the Bank to attract and retain
deposits  depends  on its  ability to provide  an  investment  opportunity  that
satisfies the requirements of investors as to rate of return,  liquidity,  risk,
convenient  locations and other factors. The Bank competes for these deposits by
offering competitive rates,  convenient business hours, community outreach and a
customer oriented staff.



                                       26

<PAGE>



General

     First Security is a federally chartered savings bank, the deposits of which
are  federally  insured  and  backed by the full  faith and credit of the United
States  Government.  Accordingly,  First  Security  is subject to broad  federal
regulation and oversight  extending to all its  operations.  First Security is a
member of the  Federal  Home Loan Bank  ("FHLB")  of  Chicago  and is subject to
certain  limited  regulation  by the Board of Governors  of the Federal  Reserve
System  ("Federal  Reserve  Board").  As the savings and loan holding company of
First Security, the Company also is subject to federal regulation and oversight.
The purpose of the  regulation of the Company and other holding  companies is to
protect  subsidiary  savings  associations.  First  Security  is a member of the
Savings  Association  Insurance Fund ("SAIF") and the deposits of First Security
are insured by the Federal Deposit Insurance  Corporation ("FDIC"). As a result,
the FDIC has certain regulatory and examination authority over First Security.

     Certain of these  regulatory  requirements  and  restrictions are discussed
below or elsewhere in this document.

Federal Regulation of Savings Associations

     The Office of Thrift Supervision  ("OTS") has extensive  authority over the
operations of savings associations. As part of this authority, First Security is
required  to file  periodic  reports  with the OTS and is  subject  to  periodic
examinations by the OTS and the FDIC. The last regular OTS and FDIC examinations
of First Security were as of December  31,1999 and April 23 1990,  respectively.
Under agency scheduling  guidelines,  it is likely that another examination will
be initiated in the near future.  When these  examinations  are conducted by the
OTS and the FDIC, the examiners may require First Security to provide for higher
general or specific loan loss reserves.  All savings associations are subject to
a semi-annual assessment,  based upon the savings association's total assets, to
fund the operations of the OTS.

     The  OTS  also  has  extensive   enforcement  authority  over  all  savings
institutions  and their  holding  companies,  including  First  Security and the
Company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate  injunctive  actions.  In  general,  these  enforcement  actions may be
initiated  for  violations  of  laws  and  regulations  and  unsafe  or  unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,  including  misleading or untimely  reports  filed with the OTS.  Except
under certain  circumstances,  public disclosure of final enforcement actions by
the OTS is required.

     In  addition,  the  investment,  lending and  branching  authority of First
Security is prescribed by federal laws and it is prohibited from engaging in any
activities not permitted by such laws. For instance,  no savings institution may
invest in  non-investment  grade  corporate debt  securities.  In addition,  the
permissible  level of  investment  by federal  associations  in loans secured by
non-residential real property may not exceed 400% of total capital,  except with
approval of the OTS. Federal savings  associations are also generally authorized
to  branch   nationwide.   First  Security  is  in  compliance  with  the  noted
restrictions.

     First    Security's     general     permissible     lending    limit    for
loans-to-one-borrower  is equal to the greater of $500,000 or 15% of  unimpaired
capital  and  surplus  (except  for  loans  fully  secured  by  certain  readily
marketable  collateral,  in  which  case  this  limit  is  increased  to  25% of
unimpaired capital and surplus).  At December 31, 1999, First Security's lending
limit under this restriction was $10.5 million.  First Security is in compliance
with the loans-to-one-borrower limitation.

     The  OTS,  as well as the  other  federal  banking  agencies,  has  adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and documentation, asset quality, earnings

                                       27

<PAGE>



standards,  internal controls and audit systems, interest rate risk exposure and
compensation and other employee benefits.  Any institution which fails to comply
with these standards must submit a compliance plan.

Insurance of Accounts and Regulation by the FDIC

     First  Security  is a member  of the  Savings  Association  Insurance  Fund
("SAIF"),  which  is  administered  by the  FDIC.  Deposits  are  insured  up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the United States  Government.  As insurer,  the FDIC imposes  deposit
insurance  premiums and is authorized to conduct  examinations of and to require
reporting by FDIC-insured  institutions.  It also may prohibit any  FDIC-insured
institution  from engaging in any activity the FDIC  determines by regulation or
order to pose a serious  risk to the FDIC.  The FDIC also has the  authority  to
initiate enforcement actions against savings associations,  after giving the OTS
an opportunity to take such action,  and may terminate the deposit  insurance if
it determines that the institution has engaged in unsafe or unsound practices or
is in an unsafe or unsound condition.

     The FDIC's  deposit  insurance  premiums are assessed  through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a risk-based  capital ratio of at least 10%) and considered healthy
pay the  lowest  premium  while  institutions  that  are  less  than  adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based  capital  ratio  of less  than  8%)  and  considered  of  substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions will be made by the FDIC for each semi-annual assessment period.

     The FDIC is authorized to increase assessment rates, on a semiannual basis,
if it  determines  that the  reserve  ratio of the  SAIF  will be less  than the
designated  reserve ratio of 1.25% of  SAIF-insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

     Effective  January 1, 1997,  the premium  schedule for BIF and SAIF insured
institutions  ranged from 0 to 27 basis points.  The  assessment  was reduced to
2.12 basis points as of January 1, 2000, when BIF insured  institutions began to
fully  participate in the assessment.  These  assessments,  which may be revised
based  upon the level of BIF and SAIF  deposits  will  continue  until the bonds
mature in the year 2017.


Regulatory Capital Requirements

     Federally insured savings associations, such as First Security are required
to  maintain a minimum  level of  regulatory  capital.  The OTS has  established
capital  standards which require the Bank to maintain minimum amounts and ratios
of total and Tier I capital  to  risk-weighted  assets  and of Tier I capital to
qualifying total assets (leverage  ratio).  These capital  requirements  must be
generally as  stringent  as the  comparable  capital  requirements  for national
banks.  The OTS is also  authorized to impose capital  requirements in excess of
these standards on individual associations on a case-by-case basis.


                                       28

<PAGE>



     The capital  regulations  require a leverage  ratio of 4% of adjusted total
assets  (as  defined  by  regulation).  Tier I capital,  used to  calculate  the
leverage  ratio,  generally  includes common  stockholders'  equity and retained
income and certain  noncumulative  perpetual  First  Security  stock and related
income.  In addition,  all  intangible  assets,  other than a limited  amount of
purchased  mortgage  servicing rights,  must be deducted from Tier I capital for
calculating compliance with the requirement. At December 31,1999, First Security
had  $190,000  of  intangible   assets  recorded  as  assets  on  its  financial
statements,  as a  result  of  its  acquisition  of  assets  and  assumption  of
liabilities from the Resolution Trust Corporation in 1994.

     The OTS  regulations  establish  special  capitalization  requirements  for
savings associations that own subsidiaries.  In determining  compliance with the
capital requirements,  all subsidiaries engaged solely in activities permissible
for national  banks or engaged in certain other  activities  solely as agent for
its customers are  "includable"  subsidiaries  that are consolidated for capital
purposes in proportion to the association's  level of ownership.  For excludable
subsidiaries the debt and equity  investments in such  subsidiaries are deducted
from assets and capital.

     At December 31,1999,  First Security had Tier I capital of $69.1 million or
19.1% of adjusted total assets,  which is approximately  $54.6 million above the
minimum requirement of 4% of adjusted total assets in effect on the date.

     The capital  standards  also require Tier I capital equal to at least 4% of
risk-weighted assets.

     At  December  31,1999,  First  Security  had Tier I capital  equal to $69.1
million or 39.4% of risk-  weighted  assets,  which is $62.1  million  above the
minimum Tier I risk-based capital ratio of 4% in effect on that date.

     The OTS risk-based  requirement requires savings associations to have total
capital of at least 8% of 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.  The
OTS is  also  authorized  to  require  a  savings  association  to  maintain  an
additional  amount of total capital to account for  concentration of credit risk
and the risk of non-traditional activities. At December 31, 1999, First Security
had $ 2.3 million of general loss  reserves of which $ 2.2 million  qualifies as
supplementary capital, which was less than 1.25% of risk-weighted assets.

     Certain  exclusions from capital and assets are required to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal  holdings of qualifying  capital  instruments.  First Security had no
such exclusions from capital and assets at December 31, 1999.

     In determining the amount of risk-weighted  assets,  all assets,  including
certain  off-balance sheet items,  will be multiplied by a risk weight,  ranging
from 0% to 100%,  based on the risk inherent in the type of asset.  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 the FNMA or FHLMC.


                                       29

<PAGE>



     OTS  regulations  also  require that a savings  association  with more than
normal interest rate risk exposure  deduct from its total capital,  for purposes
of determining compliance with such requirements,  an amount equal to 50% of its
interest-rate risk exposure  multiplied by the present value of its assets. This
exposure is a measure of the potential  decline in the net portfolio  value of a
savings  association,  greater than 2% of the present value of its assets, based
upon a  hypothetical  200 basis point  increase  or  decrease in interest  rates
(whichever  results in a greater  decline).  Net portfolio  value is the present
value of expected  cash flows from assets,  liabilities  and  off-balance  sheet
contracts.  The rule  will not  become  effective  until the OTS  evaluates  the
process by which savings associations may appeal an interest rate risk deduction
determination.  It is uncertain as to when this evaluation may be completed. Any
savings association with less than $300 million in assets and a total risk-based
capital  ratio in excess of 12% is exempt from this  requirement  unless the OTS
determines otherwise.  At the present time, the proposal is not expected to have
a material impact on the Bank.

     On December  31,  1999,  First  Security  had total  risk-based  capital of
approximately $ 71.3 million (including $ 69.1 million in core capital and $ 2.2
in  qualifying  supplementary  capital)  and  risk-weighted  assets  of $  175.6
million;  or total capital of 40.6% of risk-weighted  assets.  This amount was $
57.3 million above the 8% requirement in effect on that date.

     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.

     As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized association must agree that it will enter into a
limited  capital  maintenance   guarantee  with  respect  to  the  institution's
achievement of its capital requirements.

     Any savings  association  that fails to comply with its capital  plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less  than 3% or a  risk-based  capital  ratio of less  than 6%) must be made
subject  to  one  or  more  of  additional   specified   actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with certain limited exceptions,  within 90 days after it
becomes critically  undercapitalized.  Any undercapitalized  association is also
subject to the general enforcement  authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.

     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
Association  may  have  substantial   adverse  effects  on  its  operations  and
profitability.


                                       30

<PAGE>



Limitations on Dividends and Other Capital Distributions

     OTS regulations  impose 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.  OTS regulations  also prohibit a
savings  association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result,  the  regulatory  capital  of the  association
would be reduced below the amount  required to be maintained for the liquidation
account established in connection with its mutual to stock conversion.

     A savings association may make a capital  distribution without the approval
of the OTS provided the savings association  notifies the OTS 30 days before the
declaration  of a capital  distribution  and the savings  association  meets the
following  requirements:  (i) the savings association has a regulatory rating in
one of the two top examination  categories,  (ii) the savings association is not
of supervisory concern,  and will remain adequately - or well - capitalized,  as
defined by the OTS prompt corrective action regulations,  following the proposed
distribution,   and  (iii)  the   distribution   does  not  exceed  the  savings
associations  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
savings association does not meet the above stated requirements,  it must obtain
the prior approval of the OTS before declaring any proposed distributions.


                                       31

<PAGE>



     Penalties may be imposed upon  associations for violations the liquid asset
ratio  requirement.  At December 31, 1999, First Security was in compliance with
the requirement, with an overall liquid asset ratio of 9.19%.

Qualified Thrift Lender Test

     All savings associations,  including First Security, 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.  Under
either test, such assets primarily consist of residential  housing related loans
and  investments.  At December  31,  1999,  First  Security met the test and has
always met the test since its effectiveness.

     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  converts  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,  the
association 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 "- Holding Company Regulation."

Community Reinvestment Act

     Under  the  Community   Reinvestment   Act  ("CRA"),   every  FDIC  insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking  practices to help meet the credit needs of its entire  community,
including  low and moderate  income  neighborhoods.  The CRA does not  establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's  discretion to develop the types of products and services
that it believes are best suited to its particular  community,  consistent  with
the CRA. The CRA requires the OTS, in connection  with the  examination of First
Security,  to assess the institution's record of meeting the credit needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications,  such as a  merger  or the  establishment  of a  branch,  by First
Security. An unsatisfactory rating may be used as the basis for the denial of an
application by the OTS.

     The federal banking agencies,  including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's  compliance
with the CRA. Due to the heightened attention being given to the CRA in the past
few  years,  First  Security  may be  required  to devote  additional  funds for
investment and lending in its local  community.  First Security was examined for
CRA compliance in March 1999 and received a rating of satisfactory.

Transactions with Affiliates

     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

                                       32

<PAGE>



transactions,  such as loans to an affiliate,  are restricted to a percentage of
the association's capital.  Affiliates of First Security include the Company and
any company which is under common control with First  Security.  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.

Holding Company Regulation

     The  Company  is a unitary  savings  and loan  holding  company  subject to
regulatory  oversight  by the OTS. As such,  the Company 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 Company 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.

     As a unitary savings and loan holding company, the Company generally is not
subject to activity  restrictions.  If the Company  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  Company and any of its
subsidiaries  (other  than  First  Security  or any other  SAIF-insured  savings
association)  would  become  subject  to such  restrictions  unless  such  other
associations  each  qualify  as  a  QTL  and  were  acquired  in  a  supervisory
acquisition.

     If First  Security fails the QTL test, the Company must obtain the approval
of the OTS prior to continuing after such failure, directly or through its other
subsidiaries,  any  business  activity  other than those  approved  for multiple
savings and loan holding companies or their  subsidiaries.  In addition,  within
one year of such failure the Company must  register as, and will become  subject
to, the  restrictions  applicable  to bank  holding  companies.  The  activities
authorized  for a bank holding  company are more limited than are the activities
authorized for a unitary or multiple  savings and loan holding  company.  See "-
Qualified Thrift Lender Test."

     The Company must obtain approval from the OTS before  acquiring  control of
any other SAIF- insured association.  Such acquisitions are generally prohibited
if they  result in a  multiple  savings  and loan  holding  company  controlling
savings  associations  in  more  than  one  state.   However,   such  interstate
acquisitions  are  permitted  based  on  specific  state  authorization  or in a
supervisory acquisition of a failing savings association.

Federal Securities Law

     The stock of the Company is  registered  with the SEC under the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Company is subject to
the  information,  proxy  solicitation,  insider trading  restrictions and other
requirements of the SEC under the Exchange Act.

     First SecurityFed Financial,  Inc. stock held by persons who are affiliates
(generally  officers,  directors and principal  stockholders) of the Company may
not be resold  without  registration  or unless sold in accordance  with certain
resale restrictions. If the Company meets specified current public information

                                       33

<PAGE>



requirements,  each  affiliate  of the  Company  is able  to sell in the  public
market,  without  registration,  a limited  number of shares in any  three-month
period.

Federal Reserve System

     The Federal Reserve Board requires all depository  institutions to maintain
non-interest  bearing  reserves at specified  levels  against their  transaction
accounts (primarily checking, NOW and Super NOW checking accounts).  At December
31, 1999, First Security was in compliance with these reserve requirements.  The
balances  maintained  to meet the  reserve  requirements  imposed by the Federal
Reserve Board may be used to satisfy liquidity  requirements that may be imposed
by the OTS. See "-Liquidity."

     Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require associations to
exhaust  other  reasonable   alternative   sources  of  funds,   including  FHLB
borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System

     First  Security  is a  member  of the FHLB of  Chicago,  which is one of 12
regional FHLBs,  that  administers the home financing credit function of savings
associations.  Each FHLB  serves as a reserve  or central  bank for its  members
within its assigned  region.  It is funded  primarily from proceeds derived from
the sale of  consolidated  obligations  of the FHLB  System.  It makes  loans to
members (i.e., advances) in accordance with policies and procedures, established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal  Housing  Finance  Board.  All advances from the FHLB are required to be
fully secured by  sufficient  collateral as determined by the FHLB. In addition,
all  long-term  advances  are  required to provide  funds for  residential  home
financing.

     As a member,  First  Security is required to purchase and maintain stock in
the FHLB of Chicago.  At December 31, 1999,  First Security had $ 2.3 million in
FHLB stock, which was in compliance with this requirement.  In past years, First
Security has  received  substantial  dividends on its FHLB stock.  Over the past
five  calendar  years  such  dividends  have  averaged  6.69% and were 6.69% for
calendar year 1999. As a result of its holdings, the Bank could borrow up to $46
million from the FHLB.

     Under  federal  law  the  FHLBs  are  required  to  provide  funds  for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction in value of First  Security's FHLB stock may result in a corresponding
reduction in First Security's capital.

     For the year ended December 31, 1999, dividends paid by the FHLB of Chicago
to First Security totaled $ 145,500,  which constitutes a $ 15,500 increase from
the amount of dividends received in calendar year 1998.


                                       34

<PAGE>



Federal and State Taxation

     Savings  associations  such as First Security that meet certain  conditions
prescribed by the Internal  Revenue Code of 1986, as amended (the "Code"),  were
previously  permitted  to  establish  reserves  for bad debts and to make annual
additions  thereto which may, within  specified  formula  limits,  be taken as a
deduction in  computing  taxable  income for federal  income tax  purposes.  The
amount of the bad debt  reserve  deduction  is  computed  under  the  experience
method. Under the experience method, the bad debt reserve deduction is an amount
determined under a formula based generally upon the bad debts actually sustained
by the savings association over a period of years.

     In addition to the regular  income  tax,  corporations,  including  savings
associations such as First Security,  generally are subject to a minimum tax. An
alternative  minimum tax is imposed at a minimum tax rate of 20% on  alternative
minimum  taxable  income,  which is the sum of a  corporation's  regular taxable
income (with certain  adjustments) and tax preference  items, less any available
exemption.  The alternative  minimum tax is imposed to the extent it exceeds the
corporation's  regular  income tax and net  operating  losses can offset no more
than 90% of alternative minimum taxable income.

     A portion  of the  Bank's  reserves  for  losses on loans may not,  without
adverse tax consequences, be utilized for the payment of cash dividends or other
distributions   to  a  shareholder   (including   distributions  on  redemption,
dissolution or  liquidation) or for any other purpose (except to absorb bad debt
losses).  As of December  31,  1999,  First  Security's  excess for tax purposes
totaled approximately $ 2.0 million.

     First Security  files its federal,  state and local income tax returns on a
calendar year basis using the accrual method of accounting.

     First Security has not been audited by the IRS with respect to consolidated
federal  income  tax  returns  in the past five  years.  With  respect  to years
examined by the IRS, either all  deficiencies  have been satisfied or sufficient
reserves have been established to satisfy asserted deficiencies.  In the opinion
of  management,  any  examination  of still open returns  (including  returns of
subsidiary and  predecessors  of, or entities merged into, First Security) would
not result in a  deficiency  which could have a material  adverse  effect on the
financial condition of First Security and its consolidated subsidiary.

     Illinois Taxation.  For Illinois income tax purposes,  the Bank is taxed at
an effective rate equal to 7.18% of Illinois taxable income. For these purposes,
"Illinois  Taxable Income"  generally  means federal taxable income,  subject to
certain  adjustments  (including  the  addition of interest  income on state and
municipal  obligations  and the  exclusion of interest  income on United  States
Treasury obligations).

     Delaware Taxation.  As a Delaware holding company,  the Company is exempted
from Delaware corporate income tax but is required to file an annual report with
and pay an annual fee to the State of  Delaware.  The Company is also subject to
an annual franchise tax imposed by the State of Delaware.

Employees

     At December 31, 1999, the Company, including its subsidiaries,  had a total
of 95 employees,  including 25 part-time employees. The Bank's employees are not
represented  by  any  collective  bargaining  group.  Management  considers  its
employee relations to be good.



                                       35

<PAGE>



Executive Officers of the Corporation Who Are Not Directors


     The  business  experience  of  each  executive  officer  who is not  also a
director is set forth below.

     Harry Kucewicz. Mr. Kucewicz, age 43, is currently serving as the Treasurer
and Chief  Operating and Financial  Officer of both the Corporation and Bank. He
began working at the Bank in 1978 as the  Controller.  He was elected  Treasurer
and Chief Financial Officer in 1990 and Chief Operating Officer in August 1994.

     Mary H.  Korb.  Ms.  Korb,  age 52,  is  currently  Vice  President  of the
Corporation  and Vice President - Lending of the Bank.  Ms. Korb  supervises all
aspects of the Bank's lending operations, including lending compliance. Ms. Korb
has been with the Bank since 1970, and has served in her present  capacity since
March 1991.

     Irene S. Subota.  Ms. Subota, age 53, currently serves as Vice President of
the  Corporation  and as Vice  President - Savings of the Bank. Ms. Subota is in
charge of all aspects of the Bank's savings function,  including compliance. Ms.
Subota has been  employed by the Bank since 1973,  and has served in her current
position since 1992.

     Adrian Hawryliw.  Mr. Hawryliw,  age 63, has served as Philadelphia  Branch
Manager of the Bank since 1994 when the  Philadelphia,  Pennsylvania  branch was
acquired  from  the  Resolution  Trust  Corporation,  and  is  currently  a Vice
President of the Bank and of the  Corporation.  Mr.  Hawryliw is responsible for
supervising  operations  of the  Philadelphia,  Pennsylvania  branch,  including
business  development,  retail  deposits,  real estate  lending,  accounting and
marketing.  He has over 34 years of banking experience in the Philadelphia area,
holding  various   positions   including   Chief  Financial   Officer  and  Vice
President/Investments for other area institutions.


                                       36

<PAGE>



Item 2.                    Properties

     The following table sets forth  information  concerning the main office and
each branch office of the Bank at December 31, 1999.  At December 31, 1999,  the
Bank's premises had an aggregate net book value of approximately $2.7 million.
<TABLE>


                                               Year
                                             Acquired/        Owned or      Net Book Value at
                Location                    Established        Leased       December 31, 1999      Deposits
------------------------------------------------------------------------------------------------------------------------------------
                                                                                     (In Thousands)
<S>                                         <C>               <C>              <C>                <C>

Main Office:

936 North Western Avenue                       1964           Owned              $ 910              $152,102
Chicago, Illinois 60622-4695

Branch Offices:

2166 Plum Grove Road                           1977           Leased(1)            ---               10,893
Rolling Meadows, Illinois 60008

820 N. Western Avenue                          1983           Owned                217                1,873
Chicago, Illinois 60622

5670 N. Milwaukee Avenue                       1993           Owned              1,077               14,809
Chicago, Illinois  60646

7918 Bustleton Avenue                          1994           Owned                515               58,446
Philadelphia, Pennsylvania 19152

</TABLE>

(1) The lease expires in July 2000.



         The Bank believes that its current  facilities are adequate to meet the
present and foreseeable  future needs of the Bank and the Company.  However,  in
the future,  the Bank may  consider  the  addition  of one or more new  branches
within the Chicago or Philadelphia areas.

         The Bank's  depositor and borrower  customer files are maintained by an
independent data processing  company.  The net book value of the data processing
and  computer   equipment  utilized  by  the  Bank  at  December  31,  1999  was
approximately $454,000.

Item 3.                    Legal Proceedings

         From time to time, First Security is involved as plaintiff or defendant
in various legal proceedings arising in the normal course of its business. While
the ultimate outcome of these various legal proceedings cannot be predicted with
certainty,  it is the opinion of management  that the  resolution of these legal
actions  should  not have a  material  effect on the  Company's  and the  Bank's
financial position or results of operations.



                                       37

<PAGE>



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

         No matter was  submitted  to a vote of  security  holders,  through the
solicitation  of proxies or  otherwise,  during the quarter  ended  December 31,
1999.

                                     PART II

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

     Page 17 of the attached 1999 Annual Report to Stockholders is herein
incorporated by reference.

Item 6.   Selected Financial Data

     Pages 3 and 4 of the attached 1999 Annual Report to  Stockholders is herein
incorporated by reference.

Item 7.   Management's Discussion and Analysis of Financial Condition and
Results of Operations

     Pages 15 through 16 of the attached 1999 Annual Report to  Stockholders  is
herein incorporated by reference.

Item 8.   Financial Statements and Supplementary Data

     Pages 17 through 48 of the attached 1999 Annual Report to  Stockholders  is
herein incorporated by reference.

Item 9.   Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

     There has been no Current  Report on Form 8-K filed  within 24 months prior
to the  date of the most  recent  financial  statements  reporting  a change  of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

Directors

     Information  concerning Directors of the Corporation is incorporated herein
by reference  from the  definitive  Proxy  Statement  for the Annual  Meeting of
Stockholders  to be held in May,  2000,  a copy of which will be filed not later
than 120 days after the close of the fiscal year.

Executive Officers

     Information  regarding the business experience of the executive officers of
the Corporation  and the Bank who are not also directors  contained in Part I of
this Form 10-K is incorporated herein by reference.

                                       38

<PAGE>



Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors  and  executive  officers,  and  persons  who own more than 10% of the
Company's Common Stock (or any other equity securities, of which there is none),
to file with the SEC  initial  reports of  ownership  and  reports of changes in
ownership of the Company's  Common Stock.  Officers,  directors and greater than
10%  shareholders  are required by SEC  regulations  to furnish the Company with
copies of all Section 16(a) forms they file.  Mary H. Korb  inadvertently
failed  to file a Form 4 to report  one  transaction  on  September 1, 1998  and
reported the transaction on a Form 4 dated March 10, 2000.

     To the Company's knowledge,  based solely on a review of the copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports  were  required  during the fiscal year ended  December  31,  1999,  all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater than 10% beneficial owners were complied with.

Item 11.  Executive Compensation

     Information  concerning  executive  compensation is incorporated  herein by
reference  from  the  definitive  Proxy  Statement  for the  Annual  Meeting  of
Stockholders  to be held in May,  2000,  a copy of which will be filed not later
than 120 days after the close of the fiscal year.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     Information  concerning security ownership of certain beneficial owners and
management  is  incorporated  herein  by  reference  from the  definitive  Proxy
Statement for the Annual Meeting of Stockholders to be held in May, 2000, a copy
of which  will be filed not later  than 120 days  after the close of the  fiscal
year.

Item 13.  Certain Relationships and Related Transactions

     Information  concerning certain  relationships and related  transactions is
incorporated  herein by reference  from the definitive  Proxy  Statement for the
Annual Meeting of  Stockholders  to be held in May, 2000 a copy of which will be
filed not later than 120 days after the close of the fiscal year.



                                       39

<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)(1)  Financial Statements:

     The following financial statements are included in this Form 10-K:

     1.       Five-Year Summary of Selected Consolidated Financial Data.
     2.       Report of Independent Auditors
     3.       Consolidated Balance Sheets at December 31, 1999 and 1998.
     4.       Consolidated  Statements  of Income for the fiscal years ended
              December 31, 1999, 1998 and 1997.
     5.       Consolidated Statements of Shareholders' Equity for the fiscal
              years ended December 31, 1999, 1998 and 1997.
     6.       Consolidated  Statements  of Cash Flows for the  fiscal  years
              ended December 31, 1999, 1998 and 1997.
     7.       Notes to Consolidated Financial Statements.


     (a)(2) Financial Statement Schedules:

     All  financial  statement  schedules  have  been  omitted  as the  required
information is  inapplicable  or has been included in the Notes to  Consolidated
Financial Statements.


     (a)(3) Exhibits:

     See Exhibit Index.


     (b)  Reports on Form 8-K:

     There were no current reports on Form 8-K filed by the  Corporation  during
the quarter ended December 31, 1999.

                                       40

<PAGE>



                                   SIGNATURES


     Pursuant to the  requirements  of Section 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.


/s/ Julian E. Kulas                           /s/ Steve Babyk
--------------------------------------        ----------------------------------
Julian E. Kulas                               Steve Babyk
President, Chief Executive Officer and        Director
Director(Principal Executive Officer)

Date: March 30, 2000                         Date: March 30, 2000
      -------------------------------              -----------------------------

/s/ Lila Maria Bodnar                         /s/ Myron Dobrowolsky
--------------------------------------        ----------------------------------
Lila Maria Bodnar                             Myron Dobrowolsky
Recording Secretary and Director              Director

Date: March 30, 2000                         Date: March 30, 2000
      -------------------------------              -----------------------------

/s/ Terry Gawryk                             /s/ George Kawka
---------------------------------------      -----------------------------------
Terry Gawryk                                 George Kawka
Secretary and Director                       Director

Date: March 30, 2000                         Date: March 30, 2000
      -------------------------------              -----------------------------

/s/ Paul Nadzikewycz                         /s/ Jaroslav H. Sydorenko
---------------------------------------      -----------------------------------
Paul Nadzikewycz                             Jaroslav H. Sydorenko
Chairman of the Board                        Director

Date: March 30, 2000                         Date: March 30, 2000
      -------------------------------              -----------------------------

/s/ Chrysta Wereszczak                       /s/ Harry Kucewicz
---------------------------------------      -----------------------------------
Chrysta Wereszczak                           Harry Kucewicz
Director                                     Principal Financial and Accounting
                                             Officer

Date: March 30, 2000                         Date: March 30, 2000
      -------------------------------              -----------------------------



                                       41

<PAGE>



                                  EXHIBIT INDEX
<TABLE>

                                                                                                    Reference to
                                                                                                    Prior Filing
Regulation                                                                                          or Exhibit
  S-K                                                                                               Number
 Exhibit                                                                                            Attached
 Number                                 Document                                                    Hereto
------------------------------------------------------------------------------------------------------------------------------------
<S>     <C>                                                                                      <C>

2         Plan of acquisition, reorganization, arrangement, liquidation or  succession             None
3(a)      Certificate of Incorporation                                                              *
3(b)      By-Laws                                                                                  **
4         Instruments defining the right of security holders, including debentures                  *
9         Voting Trust Agreement                                                                   None
10        Executive Compensation Plans and Arrangements
           (a)   Employment Agreement between Julian E. Kulas and the Bank.                         *
           (b)   Change-In-Control Severance Agreement between Harry I.                             *
                  Kucewicz and the Bank
           (c)   Change-In-Control Severance Agreement between Mary H.                              *
                  Korb and the Bank
           (d)   Change-In-Control Severance Agreement between Irene S. Subota                      *
                  and the Bank
           (e)   Change-In-Control Severance Agreement between Adrian                               *
                   Hawryliw
                      and the Bank
           (f)   1998 Stock Option and Incentive Plan                                              ***
           (g)  1998 Recognition and Retention Plan                                                ***
11         Statement re:  computation of per share earnings                                        None
12         Statement re:  computation of ratios                                            Not required
13         Annual Report to Security Holders                                                         13
16         Letter re:  change in certifying accountants                                            None
18         Letter re:  change in accounting principles                                             None
21         Subsidiaries of Registrant                                                                21
22         Published report regarding matters submitted to vote of security holders                None
23         Consent of Independent Auditor                                                  Not Required
24         Power of Attorney                                                               Not Required
27         Financial Data Schedule                                                                   27
99         Additional Exhibits                                                                     None

</TABLE>


---------------
*    Filed  as  an  Exhibit  to  the  Company's   Form  S-1 Registration
     Statement filed on July 21, 1997 (File No. 333-31739)  pursuant to Section
     5 of the Securities Act of 1933. All of such previously  filed documents
     are hereby  incorporated  herein by  reference  in  accordance  with Item
     601 of Regulation S-K.



<PAGE>



**       Filed as an Exhibit to the Company's Form 10-Q  Quarterly  Report filed
         on November 15,1999 (File No. 000-23063)  pursuant to Section 12 of the
         Securities Exchange Act of 1934. All of such previously filed documents
         are hereby  incorporated  by reference in  accordance  with Item 601 of
         Regulation S-K.

***      Filed as an Exhibit to the  Company's  Definitive  Proxy  Statement  on
         Schedule  14A on  March  24,  1998  (File  No.  0-23063).  All of  such
         previously filed documents are hereby  incorporated herein by reference
         in accordance with Item 601 of Regulation S-K.