<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth certain consolidated summary historical financial
information concerning the financial position of Security Financial including
its subsidiary, Security Federal, for the dates indicated. The financial data is
derived in part from, and should be read in conjunction with, the consolidated
financial statements and related notes of Security Financial contained later in
this annual report.

<TABLE>
<CAPTION>
                                                                At June 30,
                                                      -------------------------------
                                                        2001       2000       1999
                                                      --------   --------   ---------
                                                              (In thousands)
<S>                                                   <C>        <C>        <C>
SELECTED FINANCIAL DATA:
Total assets                                          $204,917   $190,046   $ 191,495
Cash and cash equivalents                               26,501      9,854       4,520
Loans held for sale                                      1,139        357       3,430
Loans receivable, net                                  111,147    131,693     148,316
Securities available-for-sale:
    Mortgage-backed securities                           1,974      3,566       3,980
    Investment securities                               44,223     23,531      13,893
Deposits                                               149,500    151,589     165,717
Total borrowings                                        15,100        200       5,000
Total equity                                            38,070     36,486      18,532

<CAPTION>
                                                            Year ended June 30,
                                                      -------------------------------
                                                        2001       2000       1999
                                                      --------   --------   ---------
                                                              (In thousands)
<S>                                                   <C>        <C>        <C>
SELECTED OPERATING DATA:
Total interest income                                 $ 14,481   $ 14,099   $  17,779
Total interest expense                                   6,790      6,222       9,424
                                                      --------   --------   ---------
    Net interest income                                  7,691      7,877       8,355
Provision for loan losses                                  180        225         750
                                                      --------   --------   ---------
Net interest income after provision for loan losses      7,511      7,652       7,605
                                                      --------   --------   ---------
Noninterest income:
    Loan servicing fees, net of amortization               149        154        (516)
    Gain on sale of loans and servicing rights from
      secondary marketing activities                        83        256       1,527
    Other noninterest income                               841        518       1,076
        Total noninterest income                         1,073        928       2,087
                                                      --------   --------   ---------
Noninterest expense:
                                                      --------   --------   ---------
    Compensation and benefits                            3,282      3,948       5,754
    Other noninterest expense                            3,431      3,654       4,546
                                                      --------   --------   ---------
        Total noninterest expense                        6,713      7,602      10,300
                                                      --------   --------   ---------
Income (loss) before income taxes                        1,871        978        (608)
Income tax provision (benefit)                             501         --          --
                                                      --------   --------   ---------

    Net income (loss)                                 $  1,370   $    978   $    (608)
                                                      ========   ========   =========
</TABLE>


4

<PAGE>

<TABLE>
<CAPTION>
                                                                            At June 30,
                                                                 --------------------------------
                                                                  2001         2000         1999
                                                                 ------       ------       ------
<S>                                                              <C>          <C>          <C>
SELECTED OTHER DATA:
Number of:
    Mortgage loans outstanding                                    1,516        2,119        2,445
    Deposit accounts                                             16,633       17,018       18,778
    Full-service offices                                              6            6            7

<CAPTION>
                                                              At or for the year ended at June 30,
                                                              ------------------------------------
                                                                  2001         2000         1999
                                                                 ------       ------       ------
<S>                                                              <C>          <C>          <C>
SELECTED FINANCIAL RATIOS AND
  OTHER DATA:
Performance Ratios:
    Return on assets (1)                                           0.69%        0.51%       (0.24)%
    Return on equity (2)                                           3.66         3.53        (3.11)
    Average interest rate spread (3)                               3.46         3.86         3.46
    Interest rate spread at year end                               3.17         4.15         4.03
    Net interest margin (4)                                        4.16         4.37         3.64
    Operating (noninterest) expense to average total assets        3.36         3.96         4.10
    Efficiency Ratio (5)                                          76.60        86.34        98.64
    Average interest-earning assets to average
      interest-bearing liabilities                               119.27       114.96       104.47

Capital Ratios:
    Tangible capital ratio                                        13.92        14.48         9.63
    Core capital ratio                                            13.92        14.48         9.63
    Risk-based capital ratio                                      25.19        23.56        14.94
    Ratio of average equity to average assets                     18.71        14.53         7.78

Asset Quality Ratios:
    Non-performing loans to total loans                            1.77         1.34         1.41
    Allowance for loan losses to non-performing loans (6)         74.52        81.40        69.72
    Allowance for loan losses to total loans                       1.32         1.09         0.98
</TABLE>

(1)   Net income divided by average total assets.
(2)   Net income divided by average total equity.
(3)   Difference between weighted average yield on interest-earning assets and
      weighted average cost of interest-bearing liabilities.
(4)   Net interest income as a percentage of average interest-earning assets.
(5)   Noninterest expense divided by the sum of net interest income and
      noninterest income (excluding gain on sale of securities).
(6)   Nonperforming loans consist of nonaccrual loans.


                                                                               5

<PAGE>

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

General

The Company is engaged primarily in attracting deposits from the general public
and using such deposits to originate one-to-four family residential mortgage
loans, commercial mortgage loans, and, to a lesser extent, consumer and other
loans primarily in its market areas, and to acquire securities. The Company's
revenues are derived principally from interest earned on loans and securities,
and gains from sales of first mortgage loans in the secondary market and fees
from other banking-related services. The operations of the Company are
influenced significantly by general economic conditions and by policies of
financial institution regulatory agencies, primarily the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation. The Company's cost of
funds is influenced by interest rates on competing investments and general
market interest rates. Lending activities and mortgage loan sales volumes are
affected by the demand for financing of real estate and other types of loans,
which in turn is affected by the interest rates at which such financings may be
offered.

The Company's net interest income is dependent primarily upon the difference or
spread between the average yield earned on loans receivable and securities and
the average rate paid on deposits, as well as the relative amounts of such
assets and liabilities. The Company, like other thrift institutions, is subject
to interest rate risk to the degree that its interest-bearing liabilities mature
or reprice at different times, or on a different basis, than its
interest-earning assets.

Forward-Looking Statements

This Annual Report contains certain forward-looking statements which are based
on certain assumptions and describe future plans, strategies and expectations of
the Company. These forward-looking statements are generally identified by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project," or
similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which
could have a material adverse effect on the operations of the Company and the
subsidiaries include, but are not limited to, changes in interest rates, general
economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality or composition of the loan or investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in the Company's market area and accounting principles and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. The Company does not undertake--and specifically disclaims any
obligation--to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.

The following presents management's discussion and analysis of the results of
operations and financial condition of Security Financial Bancorp, Inc. as of the
dates and the for the periods indicated. This discussion should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto and other financial data appearing elsewhere in the annual report.

Comparison of Financial Condition at June 30, 2001 and June 30, 2000

Total assets at June 30, 2001 were $204.9 million compared to $190.0 million at
June 30, 2000, an increase of $14.9 million, or 7.8%. The increase was primarily
the result of $15.0 million in borrowings established with the Federal Home Loan
Bank (FHLB) during the 3rd quarter of fiscal 2001. Net loans declined to $111.1
million at June 30, 2001 from $131.7 million at June 30, 2000 primarily due to
the decline in market demand for new and refinanced residential mortgage loans,
the Bank's strategy of selling originated long-term residential mortgage loans
and the decline in the origination of residential mortgages that has resulted
from the reorganization of our mortgage banking program to a community lending
program. Consumer loans declined due to financing competition from below-market
automobile dealer incentives and from the Bank's decision to discontinue its
indirect lending program. Commercial loans continue to increase as the Bank
focuses on commercial real estate development and commercial and multi-family
real estate.


6

<PAGE>

Total equity at June 30, 2001 was $38.1 million compared to $36.5 million at
June 30, 2000, an increase of $1.6 million or 4.4%. The increase was the result
of net income of $1.4 million, the allocation of ESOP shares totaling $169,000
and the decrease of $45,000 in the unrealized loss on securities
available-for-sale.

Comparison of Operating Results for the Years Ended June 30, 2001 and June 30,
2000

General. Net income for the year ended June 30, 2001 was $1.4 million compared
to $978,000 for the year ended June 30, 2000, an increase of $392,000. The
increase was primarily the result of a $889,000 or 11.7% decrease in noninterest
expense. The decrease in noninterest expense was partially offset by an increase
in income tax expense of $501,000. No income tax expense was recorded during the
fiscal year ended June 30, 2000.

Interest Income. Interest income for the year ended June 30, 2001 was $14.5
million compared to $14.1 million for the year ended June 30, 2000, an increase
of $382,000 or 2.7%. The increase was primarily the result of an increase in the
average balance of interest earning assets to $184.7 million for the year ended
June 30, 2001 from $180.0 million for the year ended June 30, 2000. The average
yield on interest-earning assets increased to 7.84% for the year ended June 30,
2001 from 7.83% for the year ended June 30, 2000.

Interest Expense. Interest expense for the year ended June 30, 2001 was $6.8
million compared to $6.2 million for the year ended June 30, 2000, an increase
of $568,000, or 9.1%. The increase was primarily the result of an increased
balance of FHLB borrowings and an increase in the cost of funds, from 3.97% for
the year ended June 30, 2000 to 4.38% for the same period in 2001.

Net Interest Income. Net interest income of $7.7 million for the year ended June
30, 2001 reflects a decrease of $186,000 or 2.4% from the same period in 2000.
The decrease in net interest income was primarily a result of a decrease in the
net interest margin to 4.16% for the year ended June 30, 2001 from 4.37% for the
year ended June 30, 2000.

Provision for Loan Losses. The Company's provision for loan losses for the year
ended June 30, 2001 decreased $45,000 to $180,000 from $225,000 for the year
ended June 30, 2000 primarily due to decreased loan charge-off activity and a
decrease in gross loans outstanding during 2001. The amount of provision and
allowance for estimated losses on loans is influenced by current economic
conditions, actual loss experience, industry trends and other factors. The loan
loss provision for the year ended June 30, 2001 is indicative of management's
assessment of the adequacy of the allowance for loan losses, given trends in
historical loss experience of the portfolio and current economic conditions, as
well as the fact that the majority of loans are single-family residential loans
and the loan-to-values are generally less than 80%. Although management uses the
best information available and maintains the allowance for loan losses at a
level it believes adequate to provide for probable incurred losses, future
adjustments to the allowance may be necessary due to economic, operating,
regulatory and other conditions that may be beyond the Company's control.

Noninterest Income. Noninterest income for the year ended June 30, 2001 was $1.1
million compared to $928,000 for the year ended June 30, 2000, an increase of
$145,000, or 15.6%. The increase was primarily the result of increased insurance
commission income from the Bank's insurance agency subsidiary of $217,000 for
the year ended June 30, 2001 compared to $19,000 for the year ended June 30,
2000 and a $163,000 increase in cash surrender value on $6.0 million of bank
owned life insurance that was purchased during the 2nd and 3rd quarters of the
2001 fiscal year. Noninterest income for the year ended June 30, 2000 included a
one-time gain of $141,000 on the sale of mortgage servicing rights in connection
with the Company's exit from the mortgage servicing business.

Noninterest Expense. Noninterest expense for the year ended June 30, 2001 was
$6.7 million compared to $7.6 million for the year ended June 30, 2000, a
decrease of $889,000, or 11.7%. The primary reasons for the decline were a
reduction of approximately $666,000 in compensation and benefit expense, a
$63,000 reduction in data processing expenses, an $126,000 decrease in occupancy
expense and a $61,000 decrease in FDIC insurance expense. This was partially
offset by an increase of $81,000 in expenses related to the Bank's insurance
agency subsidiary, which is included in other expense.

Income Taxes. Tax net operating loss carry forwards were fully utilized during
the quarter ended December 31, 2000, causing the Company to begin recognizing
income tax expense. Future periods will be impacted by the recognition of
federal and state income tax at statutory rates and the reversal of a $252,000
valuation allowance against deferred tax assets. The Company recorded income tax
expense of $501,000 for the year ended June 30, 2001. This compares to no income
tax expense being recorded during the previous fiscal year.


                                                                               7
<PAGE>

Liquidity and Capital Resources

The Company's primary sources of funds are deposits and proceeds from principal
and interest payments on loans and mortgage-backed securities. While maturities
and scheduled amortization of loans and securities are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Company generally
manages the pricing of its deposits to be competitive and to increase core
deposit relationships.

Recent legislation repealed the Office of Thrift Supervision ("OTS") minimum
liquidity ratio requirements. OTS regulations now require the Bank to maintain
sufficient liquidity to maintain the Bank's safe and sound operation.

The Company's cash flows are comprised of three primary classifications: cash
flows from operating activities, investing activities and financing activities.
Cash flows provided by operating activities were $1.6 million and $4.5 million
for the years ended June 30, 2001 and 2000, respectively. Net cash from
investing activities consisted primarily of disbursements for loan originations
and the purchase of securities available-for-sale, offset by principal
collections on loans, proceeds from maturation and calls of securities. Net cash
from financing activities consisted primarily of activity in deposit accounts
and FHLB advances.

The Company's most liquid assets are cash and short-term investments. The levels
of these assets are dependent on the Company's operating, financing, lending and
investing activities during any given period. At June 30, 2001, cash and
short-term investments totaled $26.5 million. The Company has other sources of
liquidity if a need for additional funds arises, including securities maturing
within one year and the repayment of loans. The Company may also utilize the
sale of securities available-for-sale, federal funds purchased, and FHLB
advances as a source of funds. At June 30, 2001, the Company had the ability to
borrow a total of approximately $38.4 million from the Federal Home Loan Bank of
Indianapolis. On that date, the Company had $15.0 million of outstanding
advances.

At June 30, 2001, the Company had outstanding commitments of $3.5 million to
originate loans. These loans are to be secured by properties located in its
market area. The Company anticipates that it will have sufficient funds
available to meet its current loan commitments. Loan commitments have, in recent
periods, been funded through liquidity or through FHLB borrowings. Certificates
of deposit which are scheduled to mature in one year or less from June 30, 2001
totaled $72.1 million. Management believes, based on past experience, that a
significant portion of such deposits will remain with the Company. Based on the
foregoing, in addition to the Company's high level of core deposits and capital,
the Company considers its liquidity and capital resources sufficient to meet its
outstanding short-term and long-term needs.

Liquidity management is both a daily and long-term responsibility of management.
The Company adjusts its investments in liquid assets based upon management's
assessment of (i) expected loan demand, (ii) expected deposit flows, (iii)
yields available on interest-earning deposits and investment securities, and
(iv) the objectives of its asset/liability management program. Excess liquid
assets are invested generally in interest-earning overnight deposits and short-
and intermediate-term U.S. government and agency obligations and mortgage-backed
securities of short duration. If the Company requires funds beyond its ability
to generate them internally, it has additional borrowing capacity with the
Federal Home Loan Bank of Indianapolis.

The Bank is subject to various regulatory capital requirements imposed by the
OTS. At June 30, 2001, the Company was in compliance with all applicable capital
requirements. See "Regulation - Regulatory Capital Requirements" and "Pro Forma
Regulatory Capital Analysis" and Note 13 of the Notes to Consolidated Financial
Statements.


8

<PAGE>

Impact of Accounting Pronouncements

Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. In July
2001, the Financial Accounting Standards Board (FASB) issued SFAS 141, Business
Combinations, which requires that all business combinations be accounted for
under a single method, the purchase method. Use of the pooling-of-interests
method is no longer permitted. SFAS 141 requires that the purchase method be
used for business combinations initiated after June 30, 2001. Since this
accounting standard applies to business combinations initiated after June 30,
2001, it will have no effect on the Company's financial statements unless the
Company enters into a business combination transaction.

In July 2001, the FASB also issued SFAS 142, Goodwill and Other Intangible
Assets, which requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment. The amortization of goodwill ceases upon
adoption of the Statement, which for most companies will be January 1, 2002.
This pronouncement will not have an effect on the Company's financial
statements.

Effect of Inflation and Changing Prices

The consolidated financial statements and related data presented herein have
been prepared in accordance with generally accepted accounting principles which
require the measurement of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time due to inflation. The primary impact of inflation on the
operations of the Bank is reflected in increased operating costs. Unlike most
industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates, generally, have
a more significant impact on a financial institution's performance than does
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services.

Average Balances, Interest and Average Yields/Cost

The following table presents certain information for the periods indicated
regarding average balances of assets and liabilities as well as the total dollar
amounts of interest income from average interest-earning assets and interest
expense on average interest-bearing liabilities and average yields and costs.
The yields and costs for the periods indicated are derived by dividing income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented. Nonaccruing loans have been included in the average loan
amounts. Average balances were derived from month-end balances. Management does
not believe that the use of month-end balances instead of daily balances causes
any material differences in the information presented.


                                                                               9

<PAGE>

<TABLE>
<CAPTION>
                                                                            Year ended June 30,

                                                       -------------------------------------------------------------
                                  At June 30, 2001                  2001                            2000
                                  -----------------    -----------------------------   -----------------------------
                                             Average                         Average                          Average

                                             Yield/   Average                Yield/   Average                 Yield/

                                  Balance      Rate    Balance    Interest     Rate    Balance    Interest      Rate

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

<S>                               <C>          <C>     <C>        <C>          <C>     <C>        <C>         <C>
Interest-earning assets:
      Loans receivable (1)        $112,286     7.92%   $125,882   $ 10,423     8.28%   $145,217   $ 11,739     8.08%
      Mortgage-
        backed securities            1,974     6.34       2,946        187     6.35       3,804        252     6.62
      Securities (2)                49,523     7.46      45,095      2,992     6.63      23,609      1,552     6.57
      Other interest-
        earning assets              21,563     4.20      10,805        879     8.14       7,418        556     7.50
                                  --------             --------   --------             --------   --------

           Total interest-
            earning assets         185,346     7.35     184,728     14,481     7.84     180,048     14,099     7.83
      Non-interest-
        earning assets              19,571               15,243                          10,680
                                  --------             --------                        --------

          Total assets            $204,917             $199,971                        $190,728
                                  ========             ========                        ========

Interest-bearing
  liabilities:
      Deposits:
          NOW accounts            $  8,416     1.23%   $  7,686   $    101     1.31%   $  7,963   $    113     1.42%
          Money market
            accounts                 5,775     2.65       8,574        234     2.73       6,377        167     2.62
          Savings
            accounts                38,951     2.12      39,668        939     2.37      45,480      1,090     2.40
          Certificates
            of deposit              89,981     5.30      91,637      5,147     5.62      95,501      4,766     4.99
                                  --------             --------   --------             --------   --------
            Total
               deposits            143,123     4.09     147,565      6,421     4.35     155,321      6,136     3.95

      FHLB advances
        and other
        borrowed funds              15,100     5.04       7,320        369     5.04       1,300         86     6.62
                                  --------             --------   --------             --------   --------
          Total interest-
            bearing liabilities    158,223     4.18     154,885      6,790     4.38     156,621      6,222     3.97
                                  --------     ----    --------   --------     ----    --------   --------     ----
      Noninterest-
        bearing liabilities          8,624                7,674                           6,386
                                  --------             --------                        --------
          Total liabilities        166,847              162,559                         163,007
      Equity                        38,070               37,412                          27,721
                                  --------             --------                        --------
          Total liabilities
            and equity            $204,917             $199,971                        $190,728
                                  ========             ========                        ========
Net interest income/
  interest rate spread                         3.17%              $  7,691     3.46%              $  7,877     3.86%
                                               ====               ========     ====               ========     ====
Net interest margin/
  interest earning assets                                                      4.16%                          4.37%
                                                                               ====                           ====
Ratio of interest-
  earning assets to
  interest-bearing liabilities                                               119.27%                         114.96%
                                                                             ======                         ======

</TABLE>

(1)   Includes loans held for sale.
(2)   Includes FHLB stock.


10

<PAGE>

Rate/Volume Analysis

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

<TABLE>
<CAPTION>
                                                                        Year ended June 30, 2001
                                                                         compared to year ended
                                                                              June 30, 2000
                                                                              -------------
                                                                           Increase (Decrease)
                                                                                 Due to
                                                                                 ------
                                                                Rate             Volume            Total
                                                                -----           -------           -------
                                                                         (Dollars in thousands)
<S>                                                             <C>             <C>               <C>
Interest-earning assets:
      Loans receivable                                          $ 279           $(1,595)          $(1,316)
      Mortgage-backed securities                                  (10)              (55)              (65)
      Investment securities                                        15             1,425             1,440
      Other interest-earning assets                                51               272               323
                                                                -----           -------           -------
          Total interest-earning assets                           335                47               382

Interest-bearing liabilities:
      Deposits:
          NOW accounts                                             (8)               (4)              (12)
          Money market accounts                                     7                60                67
          Savings accounts                                        (13)             (138)             (151)
          Certificates of deposit                                 580              (199)              381
      FHLB advances and other borrowed funds                      (25)              308               283
                                                                -----           -------           -------
          Total interest-bearing liabilities                      541                27               568
                                                                -----           -------           -------

            Increase (decrease) in net interest income          $(206)          $    20           $  (186)
                                                                -----           -------           -------
</TABLE>

Market Risk Analysis

General. The Company's profitability depends primarily on its net interest
income, which is the difference between the income it receives on its loan and
investment portfolio and its cost of funds, which consists of interest paid on
deposits and borrowings. Net interest income is also affected by the relative
amounts of interest-earning assets and interest-bearing liabilities. When
interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The Company's
profitability is also affected by the level of income and expenses. Noninterest
income includes service charges and fees. Noninterest expenses primarily include
compensation and benefits, occupancy and equipment expenses, deposit insurance
premiums and data processing expenses. The Company's results of operations are
also significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government legislation and
regulation and monetary and fiscal policies.

Qualitative Aspects of Market Risk. In an attempt to manage its exposure to
changes in interest rates, management monitors Security Federal's interest rate
risk. The Board of Directors reviews at least quarterly Security Federal's
interest rate risk position and profitability. The Board of Directors also
reviews Security Federal's portfolio, formulates investment strategies and
oversees the timing and implementation of transactions to assure attainment of
Security Federal's objectives in the most effective manner. In addition, the
Board reviews on a quarterly basis Security Federal's asset/liability position,
including simulations of the effect on Security Federal's capital of various
interest rate scenarios.


                                                                              11

<PAGE>
In managing its asset/liability mix, Security Federal, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, often places more emphasis on managing short-term net
interest margin than on better matching the interest rate sensitivity of its
assets and liabilities in an effort to enhance net interest income. Management
believes that the increased net interest income resulting from a mismatch in the
maturity of its asset and liability portfolios can, during periods of declining
or stable interest rates, provide high enough returns to justify the increased
exposure to sudden and unexpected increases in interest rates.

The Board has taken a number of steps to manage Security Federal's vulnerability
to changes in interest rates. First, Security Federal uses customer service and
marketing efforts to increase Security Federal's non-certificate accounts. At
June 30, 2001, $59.5 million or 39.8% of Security Federal's deposits consisted
of demand, passbook, NOW and money market accounts. Security Federal believes
that these accounts represent "core" deposits which are generally somewhat less
interest rate sensitive than other types of deposit accounts. Second, while
Security Federal continues to originate 30 year fixed rate residential loans,
all such loans are sold in the secondary market. Currently, over 49% of Security
Federal's loans carry adjustable interest rates. Finally, Security Federal has
focused a significant portion of its investment activities on securities with
terms of five years or less. At June 30, 2001, $5.0 million or 11% of Security
Federal's securities had terms to maturity of five years or less based on their
carrying value in addition to Security Federal's mortgage-backed securities
which provide for regular principal repayments.

In order to encourage institutions to reduce their interest rate risk, the
Office of Thrift Supervision adopted a rule incorporating an interest rate risk
component into the risk-based capital rules. Using data compiled by the Office
of Thrift Supervision, Security Federal receives a report which measures
interest rate risk by modeling the change in net portfolio value over a variety
of interest rate scenarios. This procedure for measuring interest rate risk was
developed by the Office of Thrift Supervision to replace the "gap" analysis,
which is the difference between interest-earning assets and interest-bearing
liabilities that mature or reprice within a specific time period. Net portfolio
value is the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The calculation is intended to illustrate the
change in net portfolio value that will occur upon an immediate change in
interest rates of at least 200 basis points with no effect given to any steps
that management might take to counter the effect of that interest rate movement.
Under Office of Thrift Supervision regulations, an institution with a greater
than "normal" level of interest rate risk must take a deduction from total
capital for purposes of calculating its risk-based capital. The Office of Thrift
Supervision, however, has delayed the implementation of this regulation. An
institution with a "normal" level of interest rate risk is defined as one whose
"measured interest rate risk" is less than 2.0%. Institutions with assets of
less than $300 million and a risk-based capital ratio of more than 12.0% are
exempt. Security Federal is exempt because of its asset size and it has greater
than 12% risk-based capital. If the proposed regulation was implemented and
applied at June 30, 2001, Security Federal believes that its level of interest
rate risk would not have caused it to be treated as an institution with greater
than "normal" interest rate risk.

Quantitative Aspects of Market Risk. The Company does not maintain a trading
account for any class of financial instrument nor does it purchase high-risk
derivative instruments, although it has, in the past, engaged in limited hedging
activities to reduce its exposure to interest rate risk related to its mortgage
banking operation. Furthermore, the Company has no foreign currency exchange
rate risk or commodity price risk.

The Office of Thrift Supervision provides the Company with the information
presented in the following table. It presents the change in the Company's net
portfolio value at June 30, 2001, that would occur upon an immediate change in
interest rates based on Office of Thrift Supervision assumptions, but without
effect to any steps that management might take to counteract that change.

<TABLE>
<CAPTION>
                                                                      NPV as % of
    Change in                                                  Portfolio Value of Assets
 Interest Rates                Net Portfolio Value             -------------------------
in Basis Points                -------------------               NPV         Basis Point
 (Rate Shock)      Amount           $ Change        % Change    Ratio          Change
 ------------      ------           --------        --------    -----          ------
                             (Dollars in thousands)
<S>               <C>              <C>               <C>        <C>            <C>
      300         $ 25,265         (10,739)          (29.8)%    12.84%         -431 bp
      200           30,624          (5,380)          (14.9)     15.10          -205 bp
      100           33,444          (2,560)           (7.1)     16.20           -95 bp
   Static           36,004              --              --      17.15            --
     (100)          36,184              180            0.5      17.15             0 bp
     (200)          35,699            (305)           (0.8)     16.89           -26 bp
     (300)          35,177            (827)           (2.3)     16.61           -54 bp
</TABLE>
12

<PAGE>

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

As with any method of measuring interest rate risk, certain shortcomings are
inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable rate mortgage loans, have
features which restrict changes in interest rates on a short-term basis and over
the life of the asset. Further, if interest rates change, expected rates of
prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.


                                                                              13

<PAGE>

                                    [GRAPHIC]
                                  CROWE CHIZEK

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors

Security Financial Bancorp, Inc.

St. John, Indiana

We have audited the accompanying consolidated statements of financial condition
of Security Financial Bancorp, Inc. and its wholly owned subsidiaries as of June
30, 2001 and 2000 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Security Financial
Bancorp, Inc. and its wholly owned subsidiaries as of June 30, 2001 and 2000 and
the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.


                                          /s/ Crowe, Chizek and Company LLP
                                          ---------------------------------
                                          Crowe, Chizek and Company LLP

Oak Brook, Illinois

August 7, 2001


14

<PAGE>

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

JUNE 30, 2001 AND 2000
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                         2001         2000
                                                                      ---------    ---------
<S>                                                                   <C>          <C>
ASSETS
Cash and due from financial institutions                              $   4,938    $   5,149
Interest-bearing deposits in financial institutions                      21,563        4,705
                                                                      ---------    ---------
      Cash and cash equivalents                                          26,501        9,854

Securities available for sale                                            46,197       27,097
Certificates of deposit in other financial institutions                      --        7,000
Loans held for sale                                                       1,139          357
Loans receivable, net                                                   111,147      131,693
Federal Home Loan Bank stock                                              5,300        5,300
Cash surrender value of life insurance                                    6,164           --
Other real estate owned                                                     197          347
Premises and equipment, net                                               5,414        5,483
Accrued interest receivable                                               1,505        1,200
Other assets                                                              1,353        1,715
                                                                      ---------    ---------

      Total assets                                                    $ 204,917    $ 190,046
                                                                      =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
      Demand deposits                                                 $   6,377    $   4,673
      Savings                                                            38,951       41,914
      NOW and money market                                               14,191       13,721
      Time deposits, $100 and over                                       13,616       12,163
      Other time deposits                                                76,365       79,118
                                                                      ---------    ---------
                                                                        149,500      151,589

Federal Home Loan Bank advances                                          15,000           --
Other borrowed funds                                                        100          200
Advances from borrowers for taxes and insurance                             428          491
Accrued interest payable and other liabilities                            1,819        1,280
                                                                      ---------    ---------
      Total liabilities                                                 166,847      153,560

Stockholders' equity
      Preferred stock: $ .01 par value per share, 1,000,000 shares,
        authorized; no shares issued                                         --           --
      Common stock $.01 par value per share, 4,000,000 shares
        authorized, 1,938,460 shares issued and outstanding                 194          194
      Additional paid-in-capital                                         18,461       18,395
      Unearned ESOP shares                                               (1,396)      (1,499)
      Retained earnings, substantially restricted                        20,940       19,570
      Accumulated other comprehensive loss                                 (129)        (174)
                                                                      ---------    ---------
         Total stockholders' equity                                      38,070       36,486
                                                                      ---------    ---------

             Total liabilities and stockholders' equity               $ 204,917    $ 190,046
                                                                      =========    =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                                                              15

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED JUNE 30, 2001 AND 2000
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  2001      2000
                                                                -------   -------
<S>                                                             <C>       <C>
Interest and dividend income
      Loans, including fees                                     $10,423   $11,739
      Securities                                                  3,179     1,804
      Other interest-earning assets                                 879       556
                                                                -------   -------
                                                                 14,481    14,099

Interest expense
      Deposits                                                    6,421     6,136
      Federal Home Loan Bank advance and other borrowed funds       369        86
                                                                -------   -------
                                                                  6,790     6,222
                                                                -------   -------

Net interest income                                               7,691     7,877

Provision for loan losses                                           180       225
                                                                -------   -------

Net interest income after provision for loan losses               7,511     7,652

Noninterest income
      Service charges and other fees                                255       220
      Loan charges and servicing fees                               149       154
      Gain on sale of loans from secondary market activities         83       115
      Gain on sale of mortgage servicing rights                      --       141
      Gain on sale of other real estate owned                        15       105
      Other                                                         571       193
                                                                -------   -------
                                                                  1,073       928

Noninterest expense
      Compensation and benefits                                   3,282     3,948
      Occupancy and equipment                                     1,392     1,518
      SAIF deposit insurance premium                                 30        91
      Advertising and promotions                                    184       253
      Data processing                                               520       583
      Other                                                       1,305     1,209
                                                                -------   -------
                                                                  6,713     7,602
                                                                -------   -------

Income before income taxes                                        1,871       978

Income tax                                                          501        --
                                                                -------   -------

Net income                                                      $ 1,370   $   978
                                                                =======   =======

Basic and diluted earnings per share                            $   .76       .34
</TABLE>

See accompanying notes to consolidated financial statements.


16

<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED JUNE 30, 2001 AND 2000
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                   Accumulated
                                              Additional                              Other
                                     Common     Paid-in    Unearned    Retained   Comprehensive      Total
                                      Stock     Capital      ESOP      Earnings       Loss          Equity
                                     ------   ----------   --------    --------   -------------    --------
<S>                                  <C>      <C>          <C>         <C>        <C>              <C>
Balance at July 1, 1999              $   --   $       --   $     --    $ 18,592   $         (60)   $ 18,532

Issuance of common stock,
  net of conversion costs               194       18,384     (1,551)         --              --      17,027

ESOP shares earned                       --           11         52          --              --          63

Comprehensive income:
      Net income                         --           --         --         978              --         978

      Change in unrealized
        loss on securities
        available for sale               --           --         --          --            (114)       (114)
                                                                                                   --------
        Total comprehensive income                                                                      864
                                     ------   ----------   --------    --------   -------------    --------

Balance at June 30, 2000                194       18,395     (1,499)     19,570            (174)     36,486

ESOP shares earned                       --           66        103          --              --         169

Comprehensive income:
      Net income                         --           --         --       1,370              --       1,370

      Change in unrealized
        gain on securities
        available for sale               --           --         --          --              45          45
                                                                                                   --------

        Total comprehensive income                                                                    1,415
                                     ------   ----------   --------    --------   -------------    --------

Balance at June 30, 2001             $  194   $   18,461   $ (1,396)   $ 20,940   $        (129)   $ 38,070
                                     ======   ==========   ========    ========   =============    ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                                                              17

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, 2001 AND 2000
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              2001        2000
                                                                            --------    --------
<S>                                                                         <C>         <C>
Cash flows from operating activities
      Net income                                                            $  1,370    $    978
      Adjustments to reconcile net income to net cash from
        operating activities
         Depreciation                                                            629         640
         Provision for loan losses                                               180         225
         Gain on sale of other real estate owned                                 (15)       (105)
         Origination and purchase of loans held for sale                      (9,828)     (1,440)
         Proceeds from sales of loans held for sale                            9,129       1,551
         Change in mortgage loan servicing rights                                 --         (61)
         Gain on sale of loans from secondary market activities                  (83)       (115)
         (Gain) loss on sale of mortgage servicing rights                         --        (141)
         Amortization of mortgage loan servicing rights                           --         156
         Proceeds from sales of mortgage servicing rights                         --       4,044
         Accretion of discount on securities                                    (434)       (281)
         ESOP expense                                                            169          63
         Increase in cash surrender value of life insurance                     (163)         --
         Change in accrued interest receivable                                  (305)       (166)
         Change in accrued interest payable                                       70         (31)
         Change in other assets                                                  362        (273)
         Change in other liabilities                                             469        (519)
                                                                            --------    --------
           Net cash from operating activities                                  1,550       4,525

Cash flows from investing activities
      Change in certificates of deposit in other financial institutions        7,000      (7,000)
      Proceeds from maturities and calls of securities available for sale     32,846      11,092
      Principal payments on securities available for sale                      1,646       1,318
      Purchase of securities available for sale                              (53,083)    (21,583)
      Purchases of loans                                                     (11,494)    (20,101)
      Change in loans                                                         31,565      38,544
      Investment in life insurance                                            (6,001)         --
      Change in premises and equipment, net                                     (560)       (357)
                                                                            --------    --------
      Proceeds from sale of other real estate                                    430       1,085
         Net cash from investing activities                                    2,349       2,998

Cash flows from financing activities
      Change in deposits                                                      (2,089)    (14,128)
      Proceeds from stock issuance, net                                           --      17,027
      Change in advance payments by borrowers for taxes and insurance            (63)       (288)
      Proceeds from advances from Federal Home Loan Bank and
        other borrowings                                                      15,000         200
      Repayments of advances from Federal Home Loan Bank and
                                                                            --------    --------
        other borrowings                                                        (100)     (5,000)
                                                                            --------    --------
         Net cash from financing activities                                   12,748      (2,189)
</TABLE>

(Continued)


18

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

YEARS ENDED JUNE 30, 2001 AND 2000
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              2001        2000
                                                                            --------    --------
<S>                                                                         <C>         <C>
Net change in cash and cash equivalents                                     $ 16,647    $  5,334

Cash and cash equivalents at beginning of year                                 9,854       4,520
                                                                            --------    --------

Cash and cash equivalents at end of year                                    $ 26,501    $  9,854
                                                                            ========    ========

Supplemental disclosures of cash flow information
      Cash paid during the year for
         Interest                                                           $  6,720    $  6,253
         Income taxes                                                            711         272

      Transfer from loans to other real estate                                   295       1,032
</TABLE>

See accompanying notes to consolidated financial statements.


                                                                              19

<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (Table amounts in thousands, except per share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business: The accompanying consolidated financial statements include
the accounts of Security Financial Bancorp, Inc. ("the Company") and its wholly
owned subsidiary, Security Federal Bank, a Federal Savings Bank ("the Bank").
The Boulevard, Inc., Strategic Financial Corporation, and Family Home Service
Corporation, Inc. are all wholly owned subsidiaries of the Bank. All significant
intercompany transactions and balances are eliminated in consolidation.

The Bank is a federally chartered stock savings bank and a member of the Federal
Home Loan Bank (FHLB) system. The Bank maintains insurance on savings accounts
with the Savings Association Insurance Fund (SAIF) of the Federal Deposit
Insurance Corporation.

The Bank is engaged in the business of residential, commercial, and consumer
lending to customers located primarily in northwest Indiana and Will and Cook
Counties, Illinois. These communities are the source of substantially all of the
Bank's deposit and lending activities. Mortgage loans originated for resale are
originated primarily through its retail banking locations. The Bank also
purchases loans through approximately five correspondent relationships. The
Boulevard, Inc. sells insurance and brokerage services. Strategic Financial
Corporation and Family Home Service Corporation, Inc. are both inactive.

Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates. The allowance for loan loses, fair value of
loans held for sale, fair value of financial instruments, and realization of
deferred tax assets are particularly subject to change.

Statement of Cash Flows: For purposes of reporting cash flows, cash and cash
equivalents is defined to include the Company's cash on hand, due from financial
institutions, and short-term interest-bearing deposits in financial
institutions. The Company reports net cash flows for customer loan transactions,
deposit transactions, and deposits made with other financial institutions.

Securities: Securities are classified as available for sale since the Company
may decide to sell those securities for changes in market interest rates,
liquidity needs, changes in yields on alternative investments, and for other
reasons. They are carried at fair value. Unrealized gains and losses on
securities available for sale are charged or credited to a valuation allowance,
which is included as a separate component of equity, net of taxes. Realized
gains and losses on disposition are based on the net proceeds and the adjusted
carrying amount of the securities sold, using the specific identification
method. Federal Home Loan Bank stock is carried at cost.

Loans Held for Sale: Loans intended for sale in the secondary market are carried
at the lower of cost or estimated market value in the aggregate.

Loans Receivable: Loans receivable are stated at unpaid principal balances, less
the allowance for loan losses and net of deferred loan origination fees and
discounts.

Recognition of Interest Income on Loans: Interest income on loans is recognized
over the term of the loans based on the principal balance outstanding.

Loan Origination Fees, Commitment Fees, and Related Costs: Loan fees and certain
direct loan origination costs are deferred, and the net fee or cost is
recognized as an adjustment to interest income using the interest method over
the contractual life of the loans, adjusted for estimated prepayments based on
the Company's historical prepayment experience.

Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision for
loan losses and decreased by charge-offs less recoveries. Management estimates
the allowance balance required using past loan loss experience, the nature and
volume of the portfolio, information about specific borrower situations and
estimated collateral values, economic conditions, and other factors. Allocations
of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in management's judgment, should be charged off.
Loan losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed

20

<PAGE>

A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature,
such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral.

Other Real Estate Owned: Real estate properties acquired through, or in lieu of,
loan foreclosures are initially recorded at the lower of cost or fair value,
less estimated selling expenses, at the date of foreclosure. Costs relating to
improvement of property are capitalized, whereas cost relating to the holding of
property are expensed.

Income Taxes: The Company records income tax expense based on the amount of
taxes due on its tax return, plus deferred taxes computed based on the expected
future tax consequences of temporary differences between the carrying amounts
and tax bases of assets and liabilities, using enacted tax rates. A valuation
allowance has been recorded to reduce deferred tax assets to the amount expected
to be realized.

Employee Stock Ownership Plan: The cost of shares issued to the ESOP but not yet
allocated to participants are presented in the consolidated balance sheet as a
reduction of stockholders' equity. Compensation expense is recorded based on the
market price of the shares as they are committed to be released for allocation
to participant accounts. The difference between the market price and the costs
of shares committed to be released is recorded as an adjustment to paid-in
capital. Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings; dividends on unallocated ESOP shares are reflected as a
reduction of debt.

Shares are considered outstanding for earnings per share calculations as they
are committed to be released; unallocated shares are not considered outstanding.

Earnings Per Common Share: Earnings per share reflect the earnings available to
common stockholders for the year divided by the weighted average number of
common shares outstanding during the year. Diluted earnings per common share
includes the dilutive effect of additional potential common shares issuable
under stock options.

Premises and Equipment: Land is carried at cost. Buildings, leasehold
improvements, and furniture, fixtures, and equipment are carried at cost, less
accumulated depreciation. Premises and equipment are depreciated using the
straight-line method over the estimated useful lives of the related assets,
which range from three to forty years. Maintenance and repairs are expensed and
improvements are capitalized.

Comprehensive Income (Loss): Comprehensive income consists of net income and
unrealized gains and losses on securities available for sale.

Reclassifications: Certain reclassifications were made to the prior year
financial statements to conform to the 2001 presentation.


                                                                              21

<PAGE>

NOTE 2 - SECURITIES

The amortized cost and fair value of securities available for sale are as
follows as of June 30:

<TABLE>
<CAPTION>
                                                                  2001
                                             -----------------------------------------------
                                                          Gross         Gross
                                             Amortized  Unrealized    Unrealized      Fair
                                               Cost       Gains         Losses       Value
                                             ---------  ----------    ----------    --------
<S>                                          <C>        <C>           <C>           <C>
      U.S. government and federal agencies   $ 44,447   $       88    $     (312)   $ 44,223
      Mortgage-backed securities - issued
        by FHLMC and FNMA                       1,965           14            (5)      1,974
                                             --------   ----------    ----------    --------

                                             $ 46,412   $      102    $     (317)   $ 46,197
                                             ========   ==========    ==========    ========

<CAPTION>
                                                                  2000
                                             -----------------------------------------------
                                                          Gross         Gross
                                             Amortized  Unrealized    Unrealized      Fair
                                               Cost       Gains         Losses       Value
                                             ---------  ----------    ----------    --------
<S>                                          <C>        <C>           <C>           <C>
      U.S. government and federal agencies   $ 23,776   $       --    $     (245)   $ 23,531
      Mortgage-backed securities - issued
        by FHLMC and FNMA                       3,611            1           (46)      3,566
                                             --------   ----------    ----------    --------

                                             $ 27,387   $        1    $     (291)   $ 27,097
                                             ========   ==========    ==========    ========
</TABLE>

Amortized cost and fair value of debt securities available for sale by
contractual maturity are shown below. Expected maturities may differ from
contractual maturities because borrowers may call or prepay obligations.

                                                         June 30, 2001
                                                    ----------------------
                                                    Amortized        Fair
                                                      Cost          Value
                                                    ---------      -------

      Due in one year or less                        $ 2,978       $ 2,990
      Due in one to five years                         2,000         2,001
      Due in six to ten years                         16,990        16,971
      Due after ten years                             22,479        22,261
      Mortgage-backed securities                       1,965         1,974
                                                     -------       -------

                                                     $46,412       $46,197
                                                     =======       =======

There were no sales of securities during 2001 or 2000.

Securities with an amortized cost of $41,740,000 and a carrying value of
$41,233,000 contained call features at the option of the issuers.


22

<PAGE>

NOTE 3 - LOANS RECEIVABLE, NET

Loans receivable at June 30 are summarized as follows:

                                                             2001         2000
                                                         ---------    ---------
Mortgage loans
    Secured by one-to-four-family residences             $  59,568    $  76,050
    Secured by commercial and multi-family properties       18,509       18,045
Construction loans                                           1,107          767
Automobile loans                                             4,709        9,378
Home equity and second mortgage loans                       13,146       16,031
Commercial loans                                            14,023       11,837
Other consumer loans                                         1,697        1,118
                                                         ---------    ---------
                                                           112,759      133,226
Net deferred loan origination fees                            (126)         (84)
Allowance for loan losses                                   (1,486)      (1,449)
                                                         ---------    ---------

                                                         $ 111,147    $ 131,693
                                                         =========    =========

Activity in the allowance for loan losses is summarized as follows for the years
ended June 30:

                                                             2001         2000
                                                         ---------    ---------

    Balance at beginning of year                         $   1,449    $   1,469
    Provision charged to income                                180          225
    Charge-offs                                               (264)        (291)
    Recoveries on loans previously charged off                 121           46
                                                         ---------    ---------

        Balance at end of year                           $   1,486    $   1,449
                                                         =========    =========

There were no loans considered impaired as of or for the years ended June 30,
2001 and 2000.

Nonaccrual loans for which interest has been reduced totaled approximately
$1,994,000 and $1,780,000 at June 30, 2001 and 2000.

The Company's lending activities have been concentrated primarily in Lake and
Porter Counties, Indiana and Cook County, Illinois. The largest portion of the
Company's loans are originated for the purpose of enabling borrowers to purchase
residential and real estate property secured by first liens on such property. At
June 30, 2001, approximately 53% of the Company's loans were secured by
owner-occupied, one-to-four-family residential property. The Company requires
collateral on all loans and generally maintains loan-to-value ratios of 80% or
less.


                                                                              23

<PAGE>

NOTE 4 - MORTGAGE LOAN SERVICING RIGHTS

During 2000, the Bank sold its remaining servicing assets with a carrying value
of $3,864,000, resulting in a gain of $141,000 after selling expenses. The
principal amount of loans related to these servicing rights totaled
approximately $320 million. All loans originated for sale in 2001 were sold with
servicing released.

Following is an analysis of the changes in mortgage loan servicing rights for
the year ended June 30, 2000.

      Balance at July 1, 1999                                     $ 3,959
      Additions                                                        61
      Sales of servicing rights                                    (3,864)
      Amortization                                                   (156)
                                                                  -------

      Balance, June 30, 2000                                      $    --
                                                                  =======

NOTE 5 - PREMISES AND EQUIPMENT, NET

Premises and equipment at June 30 are summarized as follows:

                                                          2001       2000
                                                         ------     ------
      Cost
          Land                                           $  771     $  752
          Buildings and leasehold improvements            5,255      5,146
          Furniture, fixtures, and equipment              3,111      3,002
                                                         ------     ------
                                                          9,137      8,900
          Less accumulated depreciation                   3,723      3,417
                                                         ------     ------

                                                         $5,414     $5,483
                                                         ======     ======

NOTE 6 - DEPOSITS

At June 30, 2001, scheduled maturities of certificates of deposit are as
follows:

      2002                         $ 72,095
      2003                           13,523
      2004                            3,156
      2005                              653
      2006 and thereafter               554
                                   --------

                                    $ 89,981
                                   ========

NOTE 7 - BORROWED FUNDS

The $15,000,000 Federal Home Loan Bank (FHLB) advance has a fixed rate of 5.05%
and matures January 8, 2004. On January 8, 2002, the FHLB has the option to
convert the entire advance to an adjustable rate repricing quarterly at
three-month LIBOR plus 200 basis points.

All Federal Home Loan Bank stock owned by the Bank and all mortgage loans and
mortgage-backed securities not otherwise pledged are pledged to the Federal Home
Loan Bank of Indianapolis to secure advances. In addition, the Bank had an
undrawn line of credit for $5,000,000 as of June 30, 2001 with the Federal Home
Loan Bank of Indianapolis. This line matures on June 5, 2002, has a variable
interest rate, and is also secured by the collateral listed above.


24

<PAGE>

NOTE 8 - EMPLOYEE BENEFITS

The Bank is part of a noncontributory multi-employer defined benefit pension
plan covering substantially all of its employees. The plan is administered by
the trustees of the Financial Institutions Retirement Fund (FIRF). Benefits of
the plan are funded through payments to FIRF, which does not report relative
plan assets and actuarial liabilities of the individual participating financial
institutions. In November 2000, the Board of Directors amended the Plan to
reduce the future benefit accrual rate. Pension expense totaled $119,000 and
$268,000 for the years ended June 30, 2001 and 2000.

The Bank maintains a 401(k) profit sharing plan covering substantially all
employees. The plan allows participant salary deferrals into the plan, as well
as contributions made at the discretion of the Board of Directors. The Bank made
no contributions to the plan for 2001 and 2000.

NOTE 9 - EMPLOYEE STOCK OWNERSHIP PLAN

In 2000, the Company adopted an employee stock ownership plan (ESOP) for the
benefit of substantially all employees. The ESOP borrowed $1,550,760 from the
Company and used those funds to acquire 155,076 shares of the Company's stock at
$10 per share.

Shares issued to the ESOP are allocated to ESOP participants based on principal
and interest repayments made by the ESOP on the loan from the Company. The loan
is secured by shares purchased with the loan proceeds and will be repaid by the
ESOP with funds from the Company's discretionary contributions to the ESOP and
earnings on ESOP assets. Principal payments are scheduled to occur over a
fifteen-year period. However, in the event the Company's contributions exceed
the minimum debt service requirements, additional principal payments will be
made.

During 2001 and 2000, 10,338 and 5,169 shares of stock with an average fair
value of $16.37 and $12.09 were committed to be released, resulting in an ESOP
compensation expense of $169,000 and $63,000, respectively.

Shares held by the ESOP at June 30 are as follows:

                                                         2001         2000
                                                     --------     --------

      Allocated shares                                 15,507        5,169
      Unallocated shares                              139,569      149,907
                                                     --------     --------

          Total ESOP shares                           155,076      155,076
                                                     ========     ========

      Fair value of unallocated shares               $  2,424     $  2,117
                                                     ========     ========


                                                                              25

<PAGE>

NOTE 10 - OTHER STOCK-BASED COMPENSATION PLANS

The Company has a stock option plan under the terms of which 193,846 shares of
the Company's common stock were reserved for issuance. The options become
exercisable on a cumulative basis in equal installments over a five-year period
from the date of grant. The options expire ten years from the date of grant.

A summary of the status of the Company's stock option plan and changes during
the year are presented below:

                                                                      Weighted-
                                                           June 30,    Average
                                                               2001     Exercise
                                                            Shares      Price
                                                           -------    ---------

Outstanding at beginning of year                                --   $      --
Granted                                                    161,614       16.88
Exercised                                                       --          --
Forfeited                                                       --
                                                           -------

    Outstanding at end of year                             161,614       16.88
                                                           =======

Options exercisable at end of year                              --
Weighted-average fair value of options granted during year           $    6.86
Average remaining option term                                         10 years

The Company applies APB Opinion 25 and related Interpretations in accounting for
its stock option plan. Accordingly, no compensation cost has been recognized at
the date of grant. The Company is required to determine the fair value at the
grant dates for awards under the plan consistent with the method in SFAS No.
123, Accounting for Stock-Based Compensation, and determine the pro forma
affects on net income. For purposes of pro forma disclosure, the estimated fair
value of the options is amortized to expense over the options' vesting period.
Because the options were not granted until June 26, 2001, the pro forma effect
under SFAS No. 123 would not be material to these financial statements.

The Black-Scholes option pricing valuation model was used in estimating the fair
value of the options. Option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock options.

      Date of grant                                                June 26, 2001
      Options granted                                                    161,614
      Estimated fair value of stock options granted:               $        6.86
          Assumptions used:
              Risk-free interest rate                                      5.28%
              Expected option life                                       7 years
              Expected stock price volatility                             25.13%
              Expected dividend yield                                      0.00%

The Company adopted a Management Recognition and Retention Plan (MRP). In 2001,
the Board of Directors awarded 66,834 shares of common stock of the Corporation,
at an average cost of $16.88 per share, to be awarded to directors and key
employees. These shares vest over a five-year period. As of June 30, 2001, the
Company had not purchased the shares necessary for distribution under the MRP
plan.


26

<PAGE>

NOTE 11 - INCOME TAXES

Income tax expense for the years ended June 30 is summarized as follows:

                                                               2001     2000
                                                              -----    -----
      Federal
          Current                                             $ 696    $ 327
          Deferred                                              (28)      88
      State
          Current                                                85       --
      Change in valuation allowance for deferred tax assets    (252)    (415)
                                                              -----    -----

          Income tax                                          $ 501    $  --
                                                              =====    =====

The total income tax benefit differed from the amounts computed by applying the
federal income tax rate at June 30 to income before income taxes as a result of
the following:

                                                              2001     2000
                                                             -----    -----

      Income taxes (benefit) at statutory rate of 34%        $ 636    $ 333
      State income taxes (benefit), net of federal benefit      80       56
      Other items, net                                          37       26
      Increase (decrease) in valuation allowance              (252)    (415)
                                                             -----    -----

          Income tax                                         $ 501    $  --
                                                             =====    =====

The components of the net deferred taxes as of June 30 are as follows:

                                                              2001     2000
                                                             -----    -----

      Allowance for loan losses                              $ 589    $ 574
      Deferred loan fees                                        50       33
      Deferred compensation plans                               51       75
      Benefit of net operating loss carryforward                --       23
      Unrealized loss on securities available for sale          86      116
      Other, net                                                46       20
                                                             -----    -----
                                                               822      841
      Bad debt recapture                                      (112)    (149)
      Other, net                                               (57)     (37)
                                                             -----    -----
                                                              (169)    (186)
                                                             -----    -----
                                                               653      655
      Valuation allowance for deferred tax assets               --     (252)

                                                             $ 653    $ 403
                                                             =====    =====

Retained earnings at June 30, 2001 and 2000 includes approximately $2,935,000 of
bad debt deductions for tax years prior to 1987 for which no deferred federal
income tax liability has been recorded. This deferred federal income tax
liability would approximate $998,000. Tax legislation passed in August 1996
requires all thrift institutions to deduct a provision for bad debts for tax
purposes based on the actual loss experience and recapture the excess bad debt
reserve accumulated in the tax years after 1987.


                                                                              27

<PAGE>

NOTE 12 - EARNINGS PER SHARE

The following table presents a reconciliation of the components used to compute
basic and diluted earnings per share for the year ended June 30, 2001 and the
period from January 5, 2000 to June 30, 2000:

<TABLE>
<CAPTION>
                                                                         2001      2000
                                                                      -------   -------
<S>                                                                   <C>       <C>
      Basic and diluted earnings per share
          Net income as reported                                      $ 1,370   $   978
          Earnings prior to conversion to a stock form of ownership        --      (363)
                                                                      -------   -------
          Net income available to common stockholders                   1,370       615
          Weighted average common shares outstanding                    1,794     1,786

          Basic and diluted earnings per share                        $   .76   $   .34
                                                                      =======   =======
</TABLE>

Options to purchase 161,614 shares of common stock at an average price of $16.88
per share were outstanding at June 30, 2001 but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common stock and the options
were, therefore, antidilutive.

NOTE 13 - REGULATORY CAPITAL

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional discretionary--actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth below) of
total and Tier I capital (as defined in the regulations) to risk-weighted assets
(as defined) and of Tier I capital (as defined) to average assets (as defined).
Management believes, as of June 30, 2001, that the Bank meets all capital
adequacy requirements to which it is subject.

As of June 30, 2001, the most recent notification from the Office of Thrift
Supervision categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. There are no conditions or events since
that notification that management believes have changed the Bank's category.

The Bank's actual and required capital amounts and rates are presented below (in
thousands):


28

<PAGE>

<TABLE>
<CAPTION>
                                                                                      Requirement
                                                                                       to Be Well
                                                              Requirement          Capitalized Under
                                                              for Capital          Prompt Corrective
                                         Actual            Adequacy Purposes       Action Provisions
                                    ---------------        -----------------       -----------------
                                    Amount    Ratio         Amount    Ratio         Amount    Ratio
                                    ------    -----         ------    -----         ------    -----
<S>                                <C>          <C>        <C>           <C>       <C>          <C>
As of June 30, 2001
    Total Capital (to
        risk-weighted assets)      $29,129      25.2%      $ 9,250       8.0%      $11,563      10.0%
    Tier 1 Capital (to
        risk-weighted assets)       27,923      24.1         4,625       4.0         6,938       6.0
    Core Capital (to
        adjusted assets)            27,923      13.9         8,026       4.0        10,032       5.0

As of June 30, 2000
    Total Capital (to
        risk-weighted assets)      $27,606      23.6%      $ 9,373       8.0%      $11,717      10.0%
    Tier 1 Capital (to
        risk-weighted assets)       26,506      22.6         4,687       4.0         7,030       6.0
    Core Capital (to
        adjusted assets)            26,506      14.5         7,321       4.0         9,151       5.0
</TABLE>

NOTE 14 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements.

The Company has the following commitments outstanding at June 30:

                                                  2001     2000
                                                 ------   ------

      Commitments to fund loans                  $3,546   $1,308
      Unused lines of credit                      4,103    3,101
      Letters of credit                           1,780    1,500
      Commitments to sell loans and loan pools    1,139      357

Since certain commitments to make loans and lines of credit to fund loans in
process expire without being used, the amounts do not necessarily represent
future cash commitments. In addition, commitments used to extend credit are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. The Company's exposure to credit loss in
the event of nonperformance by the other party to these financial instruments is
represented by the contractual amount of these instruments. The Company follows
the same credit policy to make such commitments as is followed for those loans
recorded on the consolidated balance sheet.

As of June 30, 2001, fixed rate commitments to fund loans amounted to
approximately $1,290,000. The interest rates on fixed rate commitments ranged
from 6.50% to 8.50%. Since loan commitments may expire without being used, the
amounts do not necessarily represent future cash commitments.

Three of the Bank's branch facilities are leased under noncancelable lease
agreements which expire between 2002 and 2019. In addition to the monthly rent,
the Bank is charged its proportionate share of taxes and maintenance.


                                                                              29

<PAGE>

The future minimum commitments under the noncancelable leases at June 30 were:

      2002                                                          $     226
      2003                                                                228
      2004                                                                230
      2005                                                                232
      2006                                                                235
      Thereafter                                                          993
                                                                    ---------

                                                                    $   2,144
                                                                    =========

Rent expense approximated $242,000 and $293,000 for the years ended June 30,
2001 and 2000.

NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS

The following table shows the estimated fair values and the related carrying
values of the Company's financial instruments at June 30, 2001 and 2000. Items
that are not financial instruments are not included.

<TABLE>
<CAPTION>
                                                           June 30,
                                       ------------------------------------------------
                                               2 0 0 1                   2 0 0 0
                                       ----------------------    ----------------------
                                       Carrying     Estimated    Carrying     Estimated
                                        Amount      Fair Value    Amount      Fair Value
                                        ------      ----------    ------      ----------
<S>                                    <C>          <C>          <C>          <C>
Financial assets
    Cash and cash equivalents          $  26,501    $  26,501    $   9,854    $   9,854
    Certificates of deposit in other
      financial institutions                  --           --        7,000        7,000
    Securities available for sale         46,197       46,197       27,097       27,097
    Federal Home Loan Bank stock           5,300        5,300        5,300        5,300
    Loans held for sale                    1,139        1,139          357          357
    Loans receivable, net                111,147      108,194      131,693      129,755
    Accrued interest receivable            1,505        1,505        1,200        1,200
Financial liabilities
    Demand deposits                    $  (6,377)   $  (6,377)   $  (4,673)   $  (4,673)
    Savings, NOW, and MMDA
      deposits                           (53,142)     (53,142)     (55,635)     (55,635)
    Time deposits                        (89,981)     (90,730)     (91,281)     (91,018)
    Federal Home Loan Bank advances      (15,000)     (14,392)          --           --
    Other borrowed funds                    (100)        (100)        (200)        (200)
    Advances from borrowers for
      taxes and insurance                   (428)        (428)        (491)        (491)
    Accrued interest payable                 (98)         (98)         (28)         (28)
</TABLE>

For purposes of the above disclosures of estimated fair value, the following
assumptions were used as of June 30, 2001 and 2000. The estimated fair value for
cash, cash equivalents and certificates of deposit at other financial
institutions is considered to approximate cost. The estimated fair value for
securities available for sale is based on quoted market values for the
individual securities or for equivalent securities. The estimated fair value of
stock in Federal Home Loan Bank is considered to approximate cost. The estimated
fair value of loans held for sale is based on quoted market values for
equivalent loans. The estimated fair value for loans receivable is based on
estimates of the rate the Company would charge for similar loans at June 30,
2001 and 2000, applied for the estimated time period until the loan is assumed
to reprice or be paid.

The estimated fair value for demand, savings, NOW, and MMDA deposits and
advances from borrowers for taxes and insurance is based on their carrying
value. The estimated fair value for time deposits, Federal Home Loan Bank
advances, and borrowed funds is based on estimates of the rate the Company would
pay on such deposits and borrowed funds at June 30, 2001 and 2000, applied for
the time period until maturity. The estimated fair values for other financial
instruments and off-balance-sheet loan commitments approximate cost at June 30,
2001 and 2000 and are not considered significant to this presentation.


30

<PAGE>

While these estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that were the Company to have
disposed of such items at June 30, 2001 and 2000, the estimated fair values
would necessarily have been achieved at that date, since market values may
differ depending on various circumstances. Also, the use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts. The estimated fair values at June 30, 2001 and
2000 should not necessarily be considered to apply at subsequent dates.

In addition, other assets and liabilities of the Company that are not defined as
financial instruments are not included in the above disclosures, such as
property and equipment. Also, non-financial instruments typically not recognized
in the financial statements nevertheless may have value but are not included in
the above disclosures. These include, among other items, the estimated earnings
power of core deposit accounts, the earnings potential of loan servicing rights
related to the Bank's loan portfolio, the trained work force, customer goodwill,
and similar items.

NOTE 16 - OTHER COMPREHENSIVE INCOME

Other comprehensive income (loss) components and related taxes were as follows:

                                                                  2001     2000
                                                                 -----    -----
      Unrealized holding gains (losses) on securities
        available for sale                                       $  75    $(230)
      Tax effect                                                   (30)     116
                                                                 -----    -----

      Other comprehensive income (loss)                          $  45    $(114)
                                                                 =====    =====

NOTE 17 - PARENT COMPANY FINANCIAL STATEMENTS

Presented below are the condensed statements of financial condition, income, and
cash flows for Security Financial Bancorp, Inc.

                   CONDENSED STATEMENT OF FINANCIAL CONDITION
                             June 30, 2001 and 2000

                                                            2001      2000
                                                          -------   -------
ASSETS
Cash and cash equivalents                                 $ 4,076   $ 1,466
Securities available for sale                               3,985     1,996
Certificates of deposit in other financial institutions        --     5,000
ESOP loan                                                   1,466     1,523
Investment in bank subsidiary                              27,800    26,335
Accrued interest receivable and other assets                  798       213
                                                          -------   -------

      Total assets                                        $38,125   $36,533
                                                          =======   =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities                                         $    55   $    47
Stockholders' equity                                       38,070    36,486
                                                          -------   -------

      Total liabilities and stockholders' equity          $38,125   $36,533
                                                          =======   =======


                                                                              31

<PAGE>

                          CONDENSED STATEMENT OF INCOME
    Year ended June 30, 2001 and the period January 5, 2000 to June 30, 2000

<TABLE>
<CAPTION>
                                                                            2001        2000
                                                                          --------    --------
<S>                                                                       <C>         <C>
Interest income                                                           $    591    $    295

Other expenses                                                                 389         147
                                                                          --------    --------

Income before income taxes and equity in undistributed
  earnings of bank subsidiary                                                  202         148

Income taxes                                                                    80          59
                                                                          --------    --------

Income before equity in undistributed earnings of
  bank subsidiary                                                              122          89

Equity in undistributed earnings of bank subsidiary                          1,248         526
                                                                          --------    --------

Net income                                                                $  1,370    $    615
                                                                          ========    ========
</TABLE>

                        CONDENSED STATEMENT OF CASH FLOWS Year ended June 30,
    2001 and the period January 5, 2000 to June 30, 2000

<TABLE>
<S>                                                                       <C>         <C>
Cash flows from operating activities
      Net income                                                          $  1,370    $    615
      Adjustments to reconcile net income to net cash
       from operating activities
         Equity in undistributed earnings of bank subsidiary                (1,248)       (526)
         Change in
           Other assets                                                       (583)       (213)
           Other liabilities                                                     8          48
                                                                          --------    --------
             Net cash from operating activities                               (453)        (76)

Cash flows from investing activities
      Purchase of securities available for sale                             (3,994)     (2,000)
      Proceeds from maturities and calls of securities
        available-for-sale                                                   2,000          --
      ESOP loan                                                                 --      (1,551)
      Payment received on loan to ESOP                                          57          28
      Change in certificates of deposit in other financial institutions      5,000      (5,000)
      Purchase of subsidiary bank stock                                         --      (8,513)
                                                                          --------    --------
         Net cash from investing activities                                  3,063     (17,036)

Cash flows from financing activities
      Proceeds from stock issuance, net of costs                                --      18,578
                                                                          --------    --------
         Net cash from financing activities                                     --      18,578
                                                                          --------    --------

Net change in cash and cash equivalents                                      2,610       1,466

Cash and cash equivalents at beginning of year                               1,466          --
                                                                          --------    --------

Cash and cash equivalents at end of year                                  $  4,076    $  1,466
                                                                          ========    ========
</TABLE>


32

<PAGE>

NOTE 18 - CONVERSION

On January 5, 2000, the Bank completed its conversion from a federally chartered
mutual savings bank to a federal stock savings bank. The conversion was
accomplished through the amendment of the Bank's charter to stock form, the
formation of Security Financial Bancorp, Inc., which acquired 100% of the Bank's
outstanding common stock upon the conversion of the Bank from mutual to stock
form, and the sale of the Company's common stock in an amount equal to the pro
forma market value of the Bank after giving effect to the conversion.

At the time of conversion, the Bank established a liquidation account in an
amount equal to its total net worth as of the latest statement of financial
condition appearing in the final prospectus. The liquidation account will be
maintained for the benefit of eligible depositors who continue to maintain their
accounts at the Bank after the conversion. The liquidation account will be
reduced annually to the extent that eligible depositors have reduced their
qualifying deposits. Subsequent increases will not restore an eligible account
holder's interest in the liquidation account. In the event of a complete
liquidation, each eligible depositor will be entitled to receive a distribution
from the liquidation account in an amount proportionate to the current adjusted
qualifying balances for accounts then held. The liquidation account balance is
not available for payment of dividends.

The Bank may not declare or pay cash dividends on or repurchase any of its
shares of capital stock if the effect thereof would cause its net worth to be
reduced below applicable regulatory requirements or the amount of the
liquidation accounts of such a declaration and payment would otherwise violate
regulatory requirements.


                                                                              33

<PAGE>

DIRECTORS AND OFFICERS

Directors of Security Financial
Bancorp, Inc. and
Security Federal Bank & Trust
-----------------------------

Mary Beth Bonaventura
    Chairman of the Board
    Senior Judge, Lake Superior Court
    Juvenile Division

Lawrence R. Parducci
    Vice Chairman of the Board
    Pharmacist, Consultant and
    Pharmacy Insurance Solicitor,
    Fagar Pharmacy

Howard O. Cyrus, Sr.
    Owner and Real Estate Broker,
    Cyrus Realtors, Inc.

Dr. Peter Ferrini
    Retired Oral Surgeon

John P. Hyland
    President and Chief Executive Officer
    Security Financial Bancorp, Inc.
    and Security Federal Bank & Trust

Tula Kavadias
    Attorney and Sole Proprietor,
    Tula Kavadias and Associates

Richard J. Lashley
    Managing Member,
    PL Capital, LLC

Robert L. Lauer
    Vice President of Investments
    and Assistant Branch Manager,
    A.G. Edwards & Sons, Inc.

John Wm. Palmer
    Managing Member,
    PL Capital, LLC

Philip T. Rueth
    Certified Public Accountant,
    Partner of Steiber, Rueth & Co.

Robert A. Vellutini
    Vice President of Investments,
    A.G. Edwards & Sons, Inc.

Principal Officers of
Security Financial Bancorp, Inc.
--------------------------------

John P. Hyland
    President and Chief Executive Officer

Patrick J. Hunt
    Executive Vice President and
    Chief Financial Officer

Lawrence R. Parducci
    Corporate Secretary

Principal Officers of
Security Federal Bank & Trust
-----------------------------

John P. Hyland
    President and Chief Executive Officer

Patrick J. Hunt
    Executive Vice President and
    Chief Financial Officer

John F. Nicholas
    Executive Vice President,
    Business Development

Kevin Dunn
    Executive Vice President,
    Consumer and Real Estate Lending

Joann Gonzalez-Duhon
    Executive Vice President and
    Assistant Secretary, Retail Operations

Joann Halterman
    Vice President and Assistant Secretary,
    Human Resources and Marketing

Kent R. Huntoon
    Vice President and General Manager of
    The Boulevard, Inc.


34

<PAGE>

INVESTOR AND CORPORATE INFORMATION

Annual Meeting

The annual meeting of stockholders will be held at 8:30 a.m. Central time, on
October 23, 2001 at the main office of the Company located at 9321 Wicker
Avenue, St. John, Indiana 46373.

Stock Listing

Security Financial Bancorp, Inc. common stock is traded on the NASDAQ SmallCap
Market under the symbol "SFBI."

Price Range of Common Stock

The high and low per share price of the common stock for each quarter since the
common stock began trading on January 5, 2000 was as follows:

                                                             High         Low
                                                           --------     --------
2000
    Third quarter                                          $  12.00     $   9.00
    Fourth quarter                                            14.56        11.94

2001
    First quarter                                             17.50        14.00
    Second quarter                                            16.75        14.50
    Third quarter                                             16.81        15.75
    Fourth quarter                                            17.37        16.25

The stock price information set forth in the table above was provided by the
National Association of Securities Dealers, Inc. Automated Quotation System. The
closing sale price of Security Financial Bancorp, Inc.'s common stock on June
30, 2001 was $17.37.

At September 14, 2001, there were 1,935,460 shares of Security Financial
Bancorp, Inc. common stock outstanding (including unallocated ESOP shares) and
there were 426 holders of record.

Stockholders and General Inquiries              Transfer Agent

Joann Halterman                                 Registrar and Transfer Company
Security Financial Bancorp, Inc.                10 Commerce Drive
9321 Wicker Avenue                              Cranford, NJ 07016
St. John, Indiana 46373                         1-800-368-5948
(219) 365-4344

Annual and Other Reports

A copy of the Security Financial Bancorp, Inc.'s Annual Report on Form 10-KSB
without exhibits for the year ended June 30, 2001, as filed with the Securities
and Exchange Commission, may be obtained without charge by contacting Joann
Halterman, Security Financial Bancorp, Inc., 9321 Wicker Avenue, St. John,
Indiana 46373.


                                                                              35

<PAGE>

                                     [LOGO]
                                     ------
                                    SECURITY
                                    --------
                                  FEDERAL BANK
                                     & TRUST
                                    -------

                                   MAIN OFFICE
                                   -----------
                               9321 Wicker Avenue
                             St. John, Indiana 46373

                                 BRANCH OFFICES
                                 --------------
                                   Chesterton
                            552A Indian Boundry Road
                            Chesterton, Indiana 46304

                                  East Chicago
                             4518 Indianapolis Blvd.
                           East Chicago, Indiana 46312

                                     Hammond
                               7007 Calumet Avenue
                             Hammond, Indiana 46324

                                    Highland
                                 2930 Ridge Road
                             Highland, Indiana 46322

                                     Lowell
                           2090 East Commercial Avenue
                              Lowell, Indiana 46356

                                    [GRAPHIC]

                                                                   Member [LOGO]
                                                                            FDIC


36