<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     For the Fiscal Year Ended June 30, 2001

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the transition period from         to
                                   ---------  --------
                         Commission File Number: 0-27951


                        SECURITY FINANCIAL BANCORP, INC.
                 (Name of small business issuer in its charter)

       Delaware                                         35-2085053
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

9321 Wicker Avenue, St. John, Indiana                      46373
(Address of principal executive offices)                (Zip Code)

         Issuer's telephone number, including area code: (219) 365-4344

               Securities registered pursuant to Section 12 (b) of
                 the Act: None Securities registered pursuant to
                            Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
                                (Title of Class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes  X      No
    ----       ----

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB.

         The issuer's gross revenues for the fiscal year ended June 30, 2001
were $15,554,000.

         The aggregate market value of the voting and non-voting common equity
held by non-affiliates was $36,870,513, based upon the price ($19.05 per share)
as quoted on the Nasdaq SmallCap Market for September 14, 2001. Solely for
purposes of this calculation, the shares held by the directors and officers of
the registrant are deemed to be held by affiliates.

         The number of shares outstanding of the registrant's Common Stock as of
September 14, 2001 was 1,935,460.

     Transitional Small Business Disclosure Format (check one): Yes     No  X
                                                                    ---    ---


                       DOCUMENTS INCORPORATED BY REFERENCE

PORTIONS OF THE 2001 ANNUAL REPORT TO STOCKHOLDERS AND OF THE PROXY STATEMENT
FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE IN
PARTS II AND III, RESPECTIVELY, OF THIS FORM 10-KSB

<PAGE>


                                                INDEX

                                                Part I
<TABLE>
<CAPTION>

                                                                                                               Page

<S>       <C>                                                                                                   <C>
Item 1.    Description of Business................................................................................4
Item 2.    Description of Properties.............................................................................33
Item 3.    Legal Proceedings.....................................................................................33
Item 4.    Submission of Matters to a Vote of Security Holders...................................................34

                                                Part II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters.................................34
Item 6.    Management's Discussion and Analysis or Plan of Operation.............................................34
Item 7.    Financial Statements..................................................................................34
Item 8.    Changes In and Disagreements with Accountants on Accounting and Financial Disclosure .................34

                                                Part III

Item 9.    Directors, Executive Officers, Promoters, and Control Persons; Compliance with Section 16(a)
                  of the Exchange Act............................................................................34
Item 10.   Executive Compensation................................................................................34
Item 11.   Security Ownership of Certain Beneficial Owners and Management........................................34
Item 12.   Certain Relationships and Related Transactions........................................................35
Item 13.   Exhibits and Reports on Form 8-K......................................................................35

</TABLE>

<PAGE>

           THIS REPORT CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE FEDERAL SECURITIES LAWS. THESE STATEMENTS ARE NOT HISTORICAL
FACTS, RATHER THEY ARE STATEMENTS BASED ON SECURITY FINANCIAL BANCORP, INC.'S
CURRENT EXPECTATIONS REGARDING ITS BUSINESS STRATEGIES, INTENDED RESULTS, AND
FUTURE PERFORMANCE. FORWARD-LOOKING STATEMENTS ARE PRECEDED BY TERMS SUCH AS
"EXPECTS," "BELIEVES," "ANTICIPATES," "INTENDS," AND SIMILAR EXPRESSIONS.

           MANAGEMENT'S ABILITY TO PREDICT RESULTS OR THE EFFECT OF FUTURE PLANS
OR STRATEGIES IS INHERENTLY UNCERTAIN. FACTORS THAT COULD AFFECT ACTUAL RESULTS
INCLUDE INTEREST RATE TRENDS; THE GENERAL ECONOMIC CLIMATE IN THE MARKET AREA IN
WHICH SECURITY FINANCIAL BANCORP, INC. OPERATES, AS WELL AS NATIONWIDE; SECURITY
FINANCIAL BANCORP, INC.'S ABILITY TO CONTROL COSTS AND EXPENSES; COMPETITIVE
PRODUCTS AND PRICING; LOAN DELINQUENCY RATES; AND CHANGES IN FEDERAL AND STATE
LEGISLATION AND REGULATION. THESE FACTORS SHOULD BE CONSIDERED IN EVALUATING THE
FORWARD-LOOKING STATEMENTS, AND UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH
STATEMENTS. SECURITY FINANCIAL BANCORP, INC. ASSUMES NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS.


PART I

ITEM 1.    DESCRIPTION OF BUSINESS

GENERAL

           Security Financial Bancorp, Inc. (Security Financial), headquartered
in St. John, Indiana, was formed in September 1999 as the holding company for
Security Federal Bank & Trust (Security Federal) in connection with the
conversion of Security Federal from a mutual to a stock form of ownership. The
conversion was completed on January 5, 2000 through the sale of 1,938,460 shares
of common stock by Security Financial at a price of $10.00 per share. Security
Financial's sole business activity is the ownership of all of Security Federal's
capital stock. Security Financial does not transact any material business other
than through its subsidiary, Security Federal. Security Financial is subject to
the regulation of the Office of Thrift Supervision and the Securities and
Exchange Commission. Security Financial is listed on the Nasdaq SmallCap Market
under the symbol SFBI. As of June 30, 2001, Security Financial's tangible book
value per share was $19.64.

           Security Federal's principal business is attracting deposits from the
general public and originating loans secured by one-to-four-family residential
real estate properties and commercial real estate properties located in its
market area, and to a lesser extent, consumer and other loans. Security Federal
is regulated by the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation. Security Federal's deposits are federally insured by the
Federal Deposit Insurance Corporation. Security Federal is a member of the
Federal Home Loan Bank System.

MARKET AREA

           Security Federal is headquartered in St. John, Indiana which is in
Lake County. Security Federal's primary deposit gathering and lending area is
concentrated in the communities surrounding its five banking offices located in
Lake County and one banking office located in Porter County, as well as Cook and
Will Counties in Illinois. Lake and Porter Counties are located in the northwest
corner of Indiana, immediately southeast of Chicago, Illinois. It is
approximately 30 miles from the heart of Lake County to the heart of neighboring
Chicago. Several major highways, truck lines, and railways serve the area,
providing versatility and convenience of transportation. Expanding airport
facilities provide service for corporate and business needs. While primarily a
home to several steel manufacturers, Lake County has a diversified mix of
industry groups, including insurance and financial services, manufacturing,
service, government, and retail. The major employers in the area include U.S.
Steel, NIPSCO Industries, Inc., Whiteco Industries, Porter Memorial Hospital,
Valparaiso University, Valparaiso Community Schools, McGill Manufacturing, and
Hunt Wesson.





                                       4
<PAGE>

COMPETITION

           Security Federal faces intense competition for the attraction of
deposits and origination of loans in its primary market area. Its most direct
competition for deposits has historically come from the several commercial banks
operating in Security Federal's primary market area and, to a lesser extent,
from other financial institutions, such as brokerage firms, credit unions, and
insurance companies. Particularly in times of high interest rates, Security
Federal has faced additional significant competition for investors' funds from
short-term money market securities and other corporate and government
securities. Security Federal's competition for loans comes primarily from the
commercial banks and loan brokers operating in its primary market area.
Competition for deposits and the origination of loans may limit Security
Federal's growth in the future.

LENDING ACTIVITIES

           LOAN PORTFOLIO ANALYSIS. The following table presents the composition
of Security Federal's loan portfolio at the dates indicated. Security Federal
had no concentration of loans exceeding 10% of total loans receivable other than
as disclosed below.

<TABLE>
<CAPTION>

                                                                                   AT JUNE 30,
                                                          ------------------------------------------------------
                                                                      2001                        2000
                                                          -------------------------    -------------------------
                                                                          Percent                       Percent
                                                            AMOUNT       OF TOTAL         AMOUNT       OF TOTAL
                                                            ------       --------         ------       --------
                                                                          (Dollars in thousands)
Real estate loans:
<S>                                                      <C>               <C>        <C>                <C>
    One-to-four-family (1)                                $    59,568       52.83%     $    76,050        57.08%
    Multi-family and commercial real estate                    18,509       16.41           18,045        13.54
    Construction                                                1,107         .98              767          .58
                                                          -----------    --------      -----------     --------
       Total real estate loans                                 79,184       70.22           94,862        71.20

Consumer and other loans:
    Automobile                                                  4,709        4.18            9,378         7.04
    Home equity and second mortgage                            13,146       11.66           16,031        12.03
    Other                                                       1,697        1.50            1,118          .84
                                                          -----------    --------      -----------     --------
       Total consumer and other loans                          19,552       17.34           26,527        19.91

Commercial business loans                                      14,023       12.44           11,837         8.89
                                                          -----------    --------      -----------     --------

    Total loans                                               112,759      100.00%         133,226       100.00%
                                                                         ========                      ========
Less:
    Net deferred loan origination fees                            126                           84
    Allowance for loan losses                                   1,486                        1,449
                                                          -----------                  -----------

       Net loans                                          $   111,147                  $   131,693
                                                          ===========                  ===========

</TABLE>


(1)  Excludes loans available for sale.


         ONE-TO-FOUR-FAMILY REAL ESTATE LOANS. Currently, Security Federal
originates loans secured by one-to-four-family residences primarily located in
its primary market area. In the past, Security Federal purchased ARM loans
originated through correspondent relationships and secured by properties located
outside of its primary market area, many of which Security Federal continues to
hold in its portfolio.




                                       5
<PAGE>
         Security Federal offers a variety of fixed- and adjustable-rate
mortgage loan products. The loan fees charged, interest rates, and other
provisions of Security Federal's mortgage loans are determined by Security
Federal on the basis of its own pricing criteria and market conditions.
Generally, all loans originated by Security Federal conform to Fannie Mae and
Freddie Mac underwriting standards. Security Federal's fixed-rate loans
typically have maturities of 10 to 30 years, although 30-year loans constitute
the largest percentage of originations. Security Federal also offers five- and
seven-year balloon mortgages based on a 30-year amortization schedule. Security
Federal's ARM loans are typically based on a 15-year or 30-year amortization
schedule. Interest rates and payments on Security Federal's ARM loans generally
are adjusted annually after a specified period ranging from one to three years
to a rate typically equal to 2.75% above the one-year constant maturity Treasury
index. Security Federal currently offers ARM loans with initial rates below
those that would prevail under the foregoing computation, determined by Security
Federal based on market factors and competitive rates for loans having similar
features offered by other lenders for such initial periods. The maximum amount
by which the interest rate may be increased or decreased in a given period on
Security Federal's ARM loans is generally 2% per adjustment period and the
lifetime interest rate cap is generally 6% over the initial interest rate of the
loan. Security Federal qualifies the borrower based on the borrower's ability to
repay the ARM loan based on the maximum interest rate at the first adjustment in
the case of one-year ARM loans and based on the initial interest rate in the
case of ARM loans that adjust after three or more years. Security Federal does
not originate negative amortization loans. The terms and conditions of the ARM
loans offered by Security Federal, including the index for interest rates, may
vary from time to time. Security Federal believes that the annual adjustment
feature of its ARM loans also provides flexibility to meet competitive
conditions as to initial rate concessions while preserving Security Federal's
return on equity objectives by limiting the duration of the initial rate
concession.

         Borrower demand for ARM loans versus fixed-rate mortgage loans is a
function of the level of interest rates, the expectations of changes in the
level of interest rates, and the difference between the initial interest rates
and fees charged for each type of loan. The relative amount of fixed-rate
mortgage loans and ARM loans that can be originated at any time is largely
determined by the demand for each in a competitive environment. As a result of
the low interest rate environment in recent years, Security Federal has
experienced a strong customer preference for fixed-rate loans.

         The retention of ARM loans in Security Federal's loan portfolio helps
reduce Security Federal's exposure to changes in the interest rates. There are,
however, unquantifiable credit risks resulting from the potential of increased
costs due to changed rates to be paid by the customer. It is possible that,
during periods of rising interest rates, the risk of default on ARM loans may
increase as a result of repricing and the increased costs to the borrower.
Furthermore, because the ARM loans originated by Security Federal generally
provide, as a marketing incentive, for initial rates of interest below the rates
that would apply were the adjustment index used for pricing initially
(discounting), these loans are subject to increased risks of default or
delinquency. Another consideration is that although ARM loans allow Security
Federal to increase the sensitivity of its asset base to changes in interest
rates, the extent of this interest sensitivity is limited by the periodic and
lifetime interest rate adjustment limits. Because of these considerations,
Security Federal has no assurance that yields on ARM loans will be sufficient to
offset increases in Security Federal's cost of funds.

         While fixed-rate one-to-four-family residential real estate loans are
normally originated with 10- to 30-year terms, such loans typically remain
outstanding for substantially shorter periods. This is because borrowers often
prepay their loans in full upon sale of the property pledged as security or upon
refinancing the original loan. In addition, substantially all mortgage loans in
Security Federal's loan portfolio contain due-on-sale clauses providing that
Security Federal may declare the unpaid amount due and payable upon the sale of
the property securing the loan. Security Federal enforces these due-on-sale
clauses to the extent permitted by law and as business judgment dictates. Thus,
average loan maturity is a function of, among other factors, the level of
purchase and sale activity in the real estate market, prevailing interest rates,
and the interest rates payable on outstanding loans.

         Security Federal requires title insurance insuring the status of its
first lien on real estate secured loans and also requires that the fire and
extended coverage casualty insurance (and, if appropriate, flood insurance) be
maintained in an amount at least equal to the outstanding loan balance.

         Security Federal's residential mortgage loans typically do not exceed
80% of the appraised value of the property. Security Federal's lending policies
permit Security Federal to lend up to 97% of the appraised value of the
property; however, Security Federal generally requires private mortgage
insurance on the portion of the principal amount
                                       6
<PAGE>

that exceeds 80% of the appraised value of the property. Security Federal
obtains appraisals on all first mortgage real estate loans from outside
appraisers.

         MULTI-FAMILY AND COMMERCIAL REAL ESTATE LOANS. Security Federal
originates and purchases mortgage loans for the acquisition and refinancing of
multi-family and commercial real estate properties. Security Federal began
offering commercial loans in 1996.

         Multi-family and commercial real estate loans are fully amortizing
loans that are generally originated with fixed interest rates with rates tied to
the U.S. Treasury index but are occasionally originated with variable rates with
rates tied to the prime lending rate. The maximum term for a fixed-rate
multi-family loan generally is 5 years. The maximum loan-to-value ratio for a
multi-family or commercial loan is 75%.

         At June 30, 2001, the largest multi-family loan had a committed balance
of $1.1 million and was secured by an apartment building located in Chicago,
Illinois and was performing according to its original terms. This is a loan
participation with a correspondent bank.

         At June 30, 2001, Security Federal's commercial real estate loans were
secured by office, retail, and owner occupied properties, all of which are
located in Indiana and Illinois. At June 30, 2001, Security Federal's largest
commercial real estate loan had an outstanding balance of $1.7 million. The loan
is secured by a strip center located in Dyer, Indiana. At June 30, 2001, this
loan was performing according to its original terms.

         Multi-family and commercial real estate lending affords Security
Federal an opportunity to receive interest at rates higher than those generally
available from one-to-four-family residential lending. However, loans secured by
these properties usually are greater in amount and are more difficult to
evaluate and monitor and, therefore, involve a greater degree of risk than
one-to-four-family residential mortgage loans. Because payments on loans secured
by income producing properties are often dependent on the successful operation
and management of the properties, repayment of these loans may be affected by
adverse conditions in the real estate market or the economy. Security Federal
seeks to minimize these risks by generally limiting the maximum loan-to-value
ratio to up to 75% for multi-family and commercial real estate loans and by
strictly scrutinizing the financial condition of the borrower, the cash flow of
the project, the quality of the collateral, and the management of the property
securing the loan. Security Federal also generally obtains loan guarantees from
financially capable parties based on a review of personal financial statements.

         RESIDENTIAL CONSTRUCTION LOANS. Security Federal originates residential
construction loans to local home builders and to individuals for the
construction and acquisition of personal residences.

         Construction loans to individuals are made on the same terms as
Security Federal's mortgage loans, but provide for the payment of interest only
during the construction phase, which is usually six months, with a contingency
for an additional six months. At the end of the construction phase, the loan
converts to a permanent mortgage loan.

         Before making a commitment to fund a construction loan, Security
Federal requires an appraisal of the property by an independent certified
appraiser. Security Federal also reviews and inspects each project before
disbursement of funds during the term of the construction loan. Loan proceeds
are disbursed after inspection based on the percentage of completion.

         Construction lending affords Security Federal the opportunity to earn
higher interest rates with shorter terms to maturity relative to single-family
permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated cost of the
project. These loans are generally more difficult to evaluate and monitor. If
the estimate of construction cost proves to be inaccurate, Security Federal may
be required to advance funds beyond the amount originally committed to protect
the value of the project. If the estimate of value upon completion proves to be
inaccurate, Security Federal may be confronted with a project whose value is
insufficient to ensure full repayment. Projects may also be jeopardized by
disagreements between borrowers and builders and by the failure of builders to
pay subcontractors. Loans to builders to construct homes for which no purchaser
has been identified carry more risk because the payoff for the loan depends on
the builder's ability to sell the property before the construction loan is due.


                                       7
<PAGE>
         Security Federal has attempted to minimize the foregoing risks by,
among other things, limiting its construction lending to residential properties.
It is also Security Federal's general policy to obtain regular financial
statements from builders so that it can monitor their financial strength and
ability to repay.

         CONSUMER AND OTHER LOANS. Another significant lending activity of
Security Federal is the origination of consumer and other loans. Security
Federal's consumer and other loans consist primarily of home equity and second
mortgage loans and automobile loans. Most of these loans are made to existing
customers. Security Federal originates fixed and open-end home equity loans.
Open-end equity loans are in the form of lines of credit. Security Federal's
home equity loans have variable interest rates tied to the six-month U.S.
Treasury index and the prime lending rate. Security Federal imposes a maximum
loan-to-value ratio on its home equity loans of 80% after considering both the
first and second mortgage loans. The maximum loan-to-value rate on Security
Federal's second mortgage loans is 80%. Both Security Federal's home equity and
second mortgage loans are limited in term to 120 months. Security Federal's home
equity loans and second mortgages may have greater credit risk than
one-to-four-family residential mortgage loans because they are secured by
mortgages subordinated to an existing first mortgage on the property, which, in
most cases, is held by Security Federal.

         Security Federal also originates consumer loans secured by automobiles
and, occasionally, boats and other recreational vehicles. Automobile loans are
secured by both new and used cars and light trucks. Both new and used cars are
financed for a period of up to 66 months and the rate on such loans is fixed for
the term of the loan. In the past, Security Federal also offered indirect
automobile loans. The indirect automobile loans were originated through
automobile dealers in Indiana and Illinois. These dealers provided Security
Federal applications to finance vehicles sold by their dealerships. At June 30,
2001, $3.3 million, or 70%, of all automobile loans were indirect automobile
loans. Security Federal no longer offers indirect automobile loans.

         Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
rapidly depreciating assets such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss, or depreciation. The remaining deficiency often does not
warrant further substantial collection efforts against the borrower beyond
obtaining a deficiency judgment. In addition, consumer loan collections are
dependent on the borrower's continuing financial stability and thus are more
likely to be adversely affected by job loss, divorce, illness, or personal
bankruptcy. Furthermore, the application of various Federal and state laws,
including Federal and state bankruptcy and insolvency laws, may limit the amount
that can be recovered on such loans. Such loans may also give rise to claims and
defenses by a consumer loan borrower against an assignee of such loans such as
Security Federal, and a borrower may be able to assert against such assignee
claims and defenses that it has against the seller of the underlying collateral.

         COMMERCIAL BUSINESS LOANS. Security Federal makes commercial business
loans primarily in its market area to a variety of professionals, sole
proprietorships, and small businesses. Security Federal offers a variety of
commercial lending products, including term loans for fixed assets and working
capital, revolving lines of credit, letters of credit, and Small Business
Administration guaranteed loans. Secured commercial business loans are generally
made in amounts up to $500,000, although Security Federal's policy would permit
it to lend up to its legal lending limit of $4.4 million. Unsecured lines of
credit generally are made for up to $250,000. Term loans are generally offered
with fixed rates of interest of up to 5 years. Business lines of credit have
adjustable rates of interest and are payable on demand, subject to annual review
and renewal. Business loans with variable rates of interest adjust on a daily
basis and are generally indexed to the prime rate as published in THE WALL
STREET JOURNAL.

         In making commercial business loans, Security Federal considers the
financial statements of the borrower, Security Federal's lending history with
the borrower, the debt service capabilities of the borrower, the projected cash
flows of the business, and the value of the collateral. Commercial business
loans are generally secured by a variety of collateral, primarily equipment,
assets, and accounts receivable, and are supported by personal guarantees.
Depending on the collateral used to secure the loans, commercial loans are made
in amounts of up to 75% of the adjusted value of the collateral securing the
loan. Security Federal generally does not make unsecured commercial loans.

         Unlike mortgage loans, which generally are made on the basis of the
borrower's ability to make repayment from his or her employment or other income
and which are secured by real property whose value tends to be more easily
ascertainable, commercial loans are of higher risk and typically are made on the
basis of the borrower's ability to make
                                       8
<PAGE>

repayment from the cash flow of the borrower's business. As a result, the
availability of funds for the repayment of commercial loans may be substantially
dependent on the success of the business itself. Further, any collateral
securing such loans may depreciate over time, may be difficult to appraise, and
may fluctuate in value. At June 30, 2001, Security Federal's largest commercial
loan was a participation loan for $3.5 million to an insurance company located
in Deerfield, Illinois.

         LOANS TO ONE BORROWER. The maximum amount that Security Federal may
lend to one borrower is limited by federal regulations. At June 30, 2001,
Security Federal's regulatory limit on loans to one borrower was $4.4 million.
At that date, Security Federal's largest amount of loans to one borrower,
including the borrower's related interests, was $3.5 million and consisted of
one loan. This loan was performing according to its original terms at June 30,
2001.

         MATURITY OF LOAN PORTFOLIO. The following table presents certain
information at June 30, 2001 regarding the dollar amount of loans maturing in
Security Federal's portfolio based on their contractual terms to maturity, but
does not include potential prepayments. Demand loans, loans having no stated
schedule of repayments and no stated maturity, and overdrafts are reported as
becoming due within one year. Loan balances do not include undisbursed loan
proceeds, unearned discounts, unearned income, and allowance for loan losses.


<TABLE>
<CAPTION>

                                      MULTI-FAMILY                           HOME EQUITY
                         ONE-TO-         AND                                    AND
                          FOUR-       COMMERCIAL                              SECOND      OTHER    COMMERCIAL   TOTAL
                         FAMILY(1)    REAL ESTATE  CONSTRUCTION  AUTOMOBILE   MORTGAGE   CONSUMER   BUSINESS    LOANS
                        -------       -----------  ------------  ----------   --------   --------   --------    -----
                                                                   (DOLLARS IN THOUSANDS)
Amounts due in:
<S>                      <C>         <C>         <C>          <C>         <C>         <C>         <C>         <C>
   One year or less      $   2,841   $     737   $     974    $    288    $  4,901    $    872    $   5,588   $  16,201
   More than one year to
     three years             4,371       6,526         133       3,829       1,080         369        1,476      17,784
   More than three years
      to five years          4,439       2,553           -         592       1,013          56        2,746      11,399
   More than five years
      to 10 years            9,516       8,693           -           -       2,266         400        4,213      25,088
   More than 10 years
      to 20 years           22,517           -           -           -       3,241           -            -      25,758
   More than 20 years       15,884           -           -           -         645           -            -      16,529
                          ---------   ---------   ---------    --------    --------    --------    ---------   ---------

     Total amount due    $  59,568   $  18,509   $   1,107    $  4,709    $ 13,146    $  1,697    $  14,023   $ 112,759
                          =========   =========   =========    ========    ========    ========    =========   =========

</TABLE>

(1)  Excludes loans available-for-sale.






                                       9
<PAGE>

         The following table presents the dollar amount of all loans due after
June 30, 2002, which have fixed interest rates and have floating or adjustable
interest rates.

<TABLE>
<CAPTION>

                                                                               DUE AFTER JUNE 30, 2002
                                                                     -----------------------------------------
                                                                       FIXED-        ADJUSTABLE-
                                                                        RATE            RATE           TOTAL
                                                                        ----            ----           -----
                                                                               (DOLLARS IN THOUSANDS)
Amounts due in:
Real estate loans:
<S>                                                                  <C>            <C>            <C>
    One-to-four-family (1)                                           $    25,208    $    31,519    $    56,727
    Multi-family and commercial real estate                                5,227         12,545         17,772
    Construction                                                               -            133            133
                                                                     -----------    -----------    -----------
       Total real estate loans                                            30,435         44,197         74,632
                                                                     -----------    -----------    -----------
Consumer and other loans:
    Automobile                                                             4,421              -          4,421
    Home equity and second mortgage                                        5,741          2,504          8,245
    Other                                                                    640            185            825
                                                                     -----------    -----------    -----------
       Total consumer and other loans                                     10,802          2,689         13,491
                                                                     -----------    -----------    -----------
Commercial business loans                                                  4,263          4,172          8,435
                                                                     -----------    -----------    -----------

    Total loans                                                      $    45,500    $    51,058    $    96,558
                                                                     ===========    ===========    ===========

</TABLE>

(1)  Excludes loans available for sale.


         Scheduled contractual principal repayments of loans do not reflect the
actual life of the loans. The average life of a loan is substantially less than
its contractual term because of prepayments. In addition, due-on-sale clauses on
loans generally give Security Federal the right to declare loans immediately due
and payable if, among other things, the borrower sells the real property when
the mortgage and the loan is not repaid. The average life of a mortgage loan
tends to increase, however, when current mortgage loan market rates are
substantially higher than rates on existing mortgage loans and, conversely,
tends to decrease when rates on existing mortgage loans are substantially higher
than current mortgage loan market rates.

         LOAN SOLICITATION AND PROCESSING. Security Federal's lending activities
follow written, non-discriminatory, underwriting standards and loan origination
procedures established by Security Federal's Board of Directors and management.
Loan originations come from a number of sources. The customary sources of loan
originations are mortgage brokers, loan correspondents, loan origination
officers, realtors, referrals and existing customers. Various executive officers
have the authority to approve secured and unsecured loans as permitted by the
Board of Directors. Currently, Mr. Hyland has authority to approve secured and
unsecured loans with balances of up to and including $500,000 and $250,000,
respectively. Larger loans must be approved by either Mr. Hyland and at least
two other members of Security Federal's corporate loan committee, four members
of the corporate loan committee, or the loan committee of the Board. Any loans
exceeding $2.0 million must be approved by the Board.

         LOAN ORIGINATIONS, PURCHASES AND SALES. Security Federal's mortgage
lending activities are conducted primarily by its correspondent banks and
brokers and commissioned loan personnel operating at its full service banking
offices and loan offices. All loans originated by Security Federal are
underwritten by Security Federal pursuant to Security Federal's policies and
procedures. Security Federal originates both adjustable-rate and fixed-rate
mortgage loans. Security Federal's ability to originate fixed- or
adjustable-rate loans is dependent upon the relative customer demand for such
loans, which is affected by the current and expected future level of interest
rates. Security Federal recently has sought to expand its commercial lending to
enhance the yield on its loan portfolio and to encourage business relationships
with the borrowers, including through checking and other accounts and other
loans. Additionally, as part of its mortgage banking operation, Security Federal
purchases whole loans and, to a limited extent, loan participations, all with
servicing released.



                                       10
<PAGE>

         In an effort to manage its interest rate risk position, Security
Federal generally sells the fixed-rate mortgage loans with terms in excess of 15
years that it originates. However, Security Federal has retained and will retain
selected 30-year fixed-rate loans in order to build its loan portfolio and
increase the yield on its interest-earning assets. The sale of loans in the
secondary mortgage market reduces Security Federal's risk that the interest
rates paid to depositors will increase while Security Federal holds long-term
fixed-rate loans in its portfolio. It also allows Security Federal to continue
to fund loans when savings flows decline or funds are not otherwise available.
Security Federal currently generally sells loans, servicing released without
recourse to Fannie Mae. Gains, net of origination expense, from the sale of such
loans are recorded at the time of sale. Generally a loan is committed to be sold
and a price for the loan is fixed after the loan is approved and the interest
rate is accepted by the customer. This eliminates the risk to Security Federal
that a rise in market interest rates will reduce the value of a mortgage before
it can be sold.

         In the past, Security Federal generally retained the servicing rights
on the mortgage loans it sold. Servicing loans for others generally consists of
collecting mortgage payments, maintaining escrow accounts, disbursing payments
to investors, and foreclosure processing. In October 1998, however, Security
Federal sold the servicing rights related to approximately $920.0 million in
loans serviced for others. In August 1999, Security Financial arranged for the
sale of the remaining servicing rights held by Security Federal, relating to
approximately $320.0 million in loans serviced for others. Currently, all loans
sold by Security Federal are sold servicing released.








                                       11
<PAGE>

         The following table presents total loans (including loans held for
sale) originated, purchased, sold, and repaid during the periods indicated.

<TABLE>
<CAPTION>

                                                                                         For the Year Ended
                                                                                              JUNE 30,
                                                                                     ---------------------------
                                                                                        2001            2000
                                                                                        ----            ----
                                                                                           (In thousands)

<S>                                                                                  <C>            <C>
Total loans at beginning of period                                                   $   132,050    $   151,746

    Originations:
       Real estate:
          One-to-four-family                                                               9,972          7,732
          Multi-family and commercial real estate                                          2,056          3,475
          Construction                                                                       933          1,841
                                                                                     -----------    -----------
              Total real estate                                                           12,961         13,048
       Consumer and other:
          Automobile                                                                         493            802
          Home equity and second mortgage                                                  1,554          2,339
          Other                                                                              928            767
                                                                                     -----------    -----------
              Total consumer and other                                                     2,975          3,908
       Commercial business                                                                 1,177          3,120
                                                                                     -----------    -----------
          Total loans originated                                                          17,113         20,076

    Purchases:
       Real estate:
          One-to-four-family                                                               2,444         14,676
          Multi-family and commercial real estate                                              -          1,650
          Construction                                                                         -              -
                                                                                     -----------    -----------
              Total real estate                                                            2,444         16,326

       Consumer and other:
          Automobile                                                                           -              -
          Home equity and second mortgage                                                      -              -
          Other                                                                                -              -
                                                                                     -----------    -----------
              Total consumer and other                                                         -              -

       Commercial business                                                                 9,050          3,775
                                                                                     -----------    -----------
          Total loans purchased                                                           11,494         20,101

       Sales and repayments:
          Real estate:
              One-to-four-family                                                         (28,116)       (35,726)
              Multi-family and commercial real estate                                     (1,592)            (2)
              Construction                                                                  (593)        (8,202)
                                                                                     -----------    -----------
                 Total real estate                                                       (30,301)       (43,930)

       Consumer and other:
          Automobile                                                                      (5,162)        (7,550)
          Home equity and second mortgage                                                 (4,439)        (6,306)
          Other                                                                             (349)        (1,323)
                                                                                     -----------    -----------
              Total consumer and other                                                    (9,950)       (15,179)

       Commercial business                                                                (8,041)          (776)
                                                                                     -----------    -----------
          Total sales and repayments                                                     (48,292)       (59,885)
                                                                                     -----------    -----------

       Less:
          Loans in process                                                                     -              -
          Deferred loan fees                                                                 (42)            (8)
          Allowance                                                                          (37)            20
                                                                                     -----------    -----------
                                                                                             (79)            12
                                                                                     -----------    -----------

    Net loan activity                                                                    (19,764)       (19,696)
                                                                                     -----------    -----------

    Total loans at end of period                                                     $   112,286    $   132,050
                                                                                     ===========    ===========

</TABLE>

                                       12
<PAGE>

         LOAN COMMITMENTS. Security Federal issues commitments for loans
conditioned upon the occurrence of certain events. Commitments are made in
writing on specified terms and conditions and are honored for up to 90 days from
approval. At June 30, 2001, Security Federal had fixed-rate loan commitments
totaling $1.3 million, ranging in rates from 6.50% to 8.50%. Security Federal
had $2.3 million of variable rate loan commitments outstanding at June 30, 2001.

         LOAN FEES. In addition to interest earned on loans, Security Federal
receives income from fees in connection with loan originations, loan
modifications, and late payments and for miscellaneous services related to its
loans. Income from these activities varies from period to period depending upon
the volume and type of loans made and competitive conditions.

         Security Federal charges loan origination fees for fixed-rate loans,
which are calculated as a percentage of the amount borrowed. As required by
applicable accounting principles, loan origination fees and discount points in
excess of loan origination costs are deferred and recognized over the
contractual remaining lives of the related loans on a level yield basis.
Discounts and premiums on loans purchased are accreted and amortized in the same
manner. At June 30, 2001, Security Federal had $126,000 of net deferred loan
fees. Security Federal recognized $118,000 and $137,000 of net deferred loan
fees during the years ended June 30, 2001 and 2000, respectively, in connection
with loan refinancings, payoffs, sales, and ongoing amortization of outstanding
loans.

         NONPERFORMING ASSETS AND DELINQUENCIES. When a borrower fails to make a
required loan payment, Security Federal attempts to cure the deficiency by
contacting the borrower and seeking the payment. A late notice is mailed after
30 days of delinquency. In most cases, deficiencies are cured promptly. If a
delinquency continues beyond the 30th day of the delinquency, a phone call to
the borrower is usually made on the 45th day of delinquency. On or about the
60th day of delinquency, Security Federal sends a certified letter to the
borrower giving the borrower 10 days in which to work out a payment schedule.
While Security Federal generally prefers to work with borrowers to resolve
problems, Security Federal will institute foreclosure or other proceedings after
the 90th day of a delinquency, as necessary, to minimize any potential loss.

         Management informs the Board of Directors monthly of the amount of
loans delinquent more than 60 days, all loans in foreclosure, and all foreclosed
and repossessed property that Security Federal owns.

         Security Federal ceases accruing interest on mortgage loans when, in
the judgment of management, the probability of collection of interest is deemed
to be insufficient to warrant further accrual. Security Federal does not accrue
interest on mortgage loans past due 90 days or more when the estimated value of
collateral and collection efforts are deemed insufficient to ensure full
recovery. The amount of interest foregone on nonaccrual loans was not material
during fiscal 2001 or fiscal 2000.








                                       13
<PAGE>

         The following table presents information with respect to Security
Federal's nonperforming assets at the dates indicated. For the years presented,
Security Federal has had no impaired loans or troubled debt restructurings
(which involve forgiving a portion of interest or principal on any loans or
making loans at a rate materially less than that of market rates).

<TABLE>
<CAPTION>

                                                                                               AT JUNE 30,
                                                                                        ----------------------
                                                                                           2001         2000
                                                                                           ----         ----
    Nonaccruing loans:                                                                   (DOLLARS IN THOUSANDS)
       Real estate:
<S>                                                                                     <C>          <C>
          One-to-four-family                                                            $   1,333    $   1,084
          Multi-family and commercial real estate                                               -            -
          Construction                                                                          -            -
                                                                                        ---------    ---------
              Total real estate                                                             1,333        1,084
       Consumer and other:
          Automobile                                                                          258          221
          Home equity and second mortgage                                                      93          229
          Other                                                                               194          246
                                                                                        ---------    ---------
              Total consumer and other                                                        545          696
       Commercial business                                                                    116            -
                                                                                        ---------    ---------
          Total nonaccruing loans (1)                                                       1,994        1,780
       Loans past due 90 days and accruing interest                                             -            -
                                                                                        ---------    ---------
          Total nonperforming loans                                                         1,994        1,780
       Real estate owned                                                                      197          347
                                                                                        ---------    ---------

          Total nonperforming assets (2)                                                $   2,191    $   2,127
                                                                                        =========    =========

       Loan allowance as a percentage of total loans                                         1.32%         1.09%
       Loan allowance as a percentage of non-performing loans                               74.52%        81.40%
       Total nonperforming loans as a percentage of total loans                              1.77%         1.34%
       Total nonperforming assets as a percentage of total assets                            1.07%         1.12%

</TABLE>

(1)   Total nonaccruing loans equals total nonperforming loans.
(2)   Nonperforming assets consist of nonperforming loans, impaired loans, real
      estate owned and other repossessed assets.







                                       14
<PAGE>

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

<TABLE>
<CAPTION>

                                          AT JUNE 30, 2001                                AT JUNE 30, 2000
                            --------------------------------------------     --------------------------------------------
                                 60-89 DAYS           90 DAYS OR MORE            60-89 DAYS            90 DAYS OR MORE
                            --------------------     -------------------     -------------------    ---------------------
                            NUMBER     PRINCIPAL    NUMBER     PRINCIPAL     NUMBER     PRINCIPAL    NUMBER     PRINCIPAL
                             OF      BALANCE OF      OF      BALANCE OF       OF      BALANCE OF      OF      BALANCE OF
                            LOANS       LOANS       LOANS       LOANS        LOANS       LOANS       LOANS       LOANS
                            -----       -----       -----       -----        -----       -----       -----       -----
Real estate:
<S>                             <C>  <C>               <C>   <C>               <C>    <C>              <C>   <C>  <C>
    One-to-four-family           8    $    452          9     $    315          18     $   1,447        16    $    933
    Multi-family and
      commercial
      real estate                1         159          -            -           -             -         -           -
    Construction                 -           -          -            -           -             -         -           -

Consumer and other:
    Automobile                  14         104         29          315          23           260        18         206
    Home equity
      and second
      mortgage                   -           -          6          201           3           102         7         229
    Other                        5          17         37          167           -             -        32         246
Commercial business              -           -          2          116           -             -         -           -
                          ---------   ---------   ---------    --------    --------    ---------  --------     -------

    Total                       28    $    732         83     $  1,114          44     $   1,809        73    $  1,614
                          =========   =========   =========    ========    ========    =========  ========     =======

Delinquent loans to total loans           0.65%                   0.99%                     1.35%                 1.21%

</TABLE>


         REAL ESTATE OWNED. Real estate acquired by Security Federal as a result
of foreclosure or by deed-in-lieu of foreclosure is classified as real estate
owned until sold. When property is acquired it is recorded at fair market value
at the date of foreclosure, establishing a new cost basis. If the fair value
declines, Security Federal records a valuation allowance through expense. Costs
after acquisition are expensed. At June 30, 2001, Security Federal had $197,000
of real estate owned, consisting of $60,000 of vacant land and the remainder in
residential property.

         ASSET CLASSIFICATION. The Office of Thrift Supervision has adopted
various regulations regarding problem assets of savings institutions. The
regulations require that each insured institution review and classify its assets
on a regular basis. In addition, Office of Thrift Supervision examiners have
authority to identify problem assets during examinations and, if appropriate,
require them to be classified.

         There are three classifications for problem assets: substandard,
doubtful, and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions, and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention." Security Federal monitors "special mention"
assets.




                                       15
<PAGE>

         The aggregate amounts of Security Federal's classified and special
mention assets at the dates indicated were as follows:

                                                            AT JUNE 30,
                                                      ---------------------
                                                         2001         2000
                                                         ----         ----
                                                            (IN THOUSANDS)
Classified assets:
     Loss                                              $     -       $    -
     Doubtful                                                -            -
     Substandard                                         2,073        1,891
     Special mention                                       509          825

         At June 30, 2001, assets designated substandard consisted of real
estate owned of $197,000, residential mortgage loans totaling $1.2 million, home
equity and second mortgages totaling $93,000, automobile loans totaling
$315,000, commercial loans totaling $116,000, and other loans of $167,000.
Assets designated as special mention consisted of $410,000 in residential
mortgage loans, $64,000 of home equity and second mortgages and $35,000 of
automobile loans.

         ALLOWANCE FOR LOAN LOSSES. In originating loans, Security Federal
recognizes that losses will be experienced and that the risk of loss will vary
with, among other things, the type of loan being made, the creditworthiness of
the borrower over the term of the loan, general economic conditions, and in the
case of a secured loan, the quality of the security for the loan. The allowance
method is used in providing for loan losses. Accordingly, all loan losses are
charged to the allowance and all recoveries are credited to it. The allowance
for loan losses is established through a provision for loan losses charged to
operations. The provision for loan losses is for probable incurred losses and is
based on management's evaluation of the collectibility of the loan portfolio,
including past loan loss experience, known and inherent risks in the nature and
volume of the portfolio, information about specific borrower situations and
estimated collateral values, and economic conditions.

         At June 30, 2001, Security Federal had an allowance for loan losses of
$1.5 million. Although management believes that it uses the best information
available to establish the allowance for loan losses, future adjustments to the
allowance for loan losses may be necessary and results of operations could be
significantly and adversely affected if circumstances differ substantially from
the assumptions used in making the determinations. Furthermore, while Security
Federal believes that it has established its existing allowance for loan losses
as required by generally accepted accounting principles, there can be no
assurance that regulators, in reviewing Security Federal's loan portfolio, will
not request Security Federal to increase significantly its allowance for loan
losses. In addition, because future events affecting borrowers and collateral
cannot be predicted with certainty, there can be no assurance that the existing
allowance for loan losses is adequate or that substantial increases will not be
necessary should the quality of any loans deteriorate as a result of the factors
discussed above. Any material increase in the allowance for loan losses may
adversely affect Security Federal's financial condition and results of
operations.





                                       16
<PAGE>

         The following table presents an analysis of Security Federal's
allowance for loan losses.

<TABLE>
<CAPTION>

                                                                               YEAR ENDED JUNE 30,
                                                                              --------------------
                                                                               2001         2000
                                                                               -----        -----
                                                                             (DOLLARS IN THOUSANDS)

<S>                                                                        <C>          <C>
Allowance for loan losses, beginning of period                             $   1,449    $   1,469
Charge-offs:
     Real estate:
         One-to-four-family                                                      (92)        (119)
         Multi-family and commercial real estate                                   -            -
         Construction                                                              -            -
     Consumer and other:
         Automobile                                                              (95)
         Home equity and second mortgage                                           -
         Other                                                                   (49)        (172)
     Commercial business                                                         (28)
                                                                           ---------    ---------
         Total charge-offs                                                      (264)        (291)
                                                                           ---------    ---------
Recoveries:
     Real estate:
         One-to-four-family                                                       20            9
         Multi-family and commercial real estate                                   -            -
         Construction                                                              -            -
     Consumer and other:
         Automobile                                                               17
         Home equity and second mortgage                                           -
         Other                                                                    22           37
     Commercial business                                                          62            -
                                                                           ---------    ---------
         Total recoveries                                                        121           46
                                                                           ---------    ---------
Net charge-offs                                                                 (143)        (245)
Provision for loans losses                                                       180          225
                                                                           ---------    ---------

Allowance for loan losses, end of period                                   $   1,486    $   1,449
                                                                           =========    =========

Net charge-offs to average interest-earning loans                                0.16%        0.17%
Allowance for loan losses to total loans                                         1.32         1.09
Allowance for loan losses to nonperforming loans                                74.52        81.40
Net charge-offs to beginning allowance for loan losses                           9.87        16.67

</TABLE>





                                       17
<PAGE>

The following table presents the approximate allocation of the allowance for
loan losses by loan category at the dates indicated. Management believes that
the allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any other category.

<TABLE>
<CAPTION>

                                                                       AT JUNE 30,
                                      ---------------------------------------------------------------------------
                                                   2001                                        2000
                                      ----------------------------------     ------------------------------------
                                                              PERCENT OF                              PERCENT OF
                                                              GROSS LOANS                             GROSS LOANS
                                                PERCENT OF      IN EACH                 PERCENT OF      IN EACH
                                                 ALLOWANCE     CATEGORY                  ALLOWANCE     CATEGORY
                                                 TO TOTAL      TO TOTAL                  TO TOTAL      TO TOTAL
                                      AMOUNT     ALLOWANCE    GROSS LOANS     AMOUNT     ALLOWANCE    GROSS LOANS
                                      ------     ---------    -----------     ------     ---------    -----------
<S>                                  <C>           <C>            <C>       <C>            <C>           <C>
Real estate loans:
   One-to-four-family (1)             $  651        43.80%         52.83%    $   662        45.69%        57.08%
   Multi-family and commercial
     real estate                         222        14.94          16.41         138         9.52         13.54
   Construction                            1         0.07           0.98          10         0.69          0.58
Consumer loans and other:
   Automobile                            167        11.24           4.18         192        13.25          7.04
   Home equity and second mortgage        30         2.02          11.66          48         3.31         12.03
   Other                                 142         9.56           1.50         192        13.25          0.84
Commercial business loans                211        14.20          12.44         143         9.87          8.89
Unallocated                               62         4.17              -          64         4.42             -
                                      ------     --------       --------      -------    ---------      -------

   Total allowance for loan losses    $1,486       100.00%        100.00%    $ 1,449       100.00%       100.00%
                                      ======     ========       =========     =======    =========      =======

</TABLE>

(1)  Excludes loans held for sale.


SECURITIES ACTIVITIES

         Security Financial is permitted under federal law to invest in various
types of liquid assets, including U.S. Government obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
Federal Home Loan Bank of Indianapolis, certificates of deposit of federally
insured institutions, certain bankers' acceptances, and federal funds. Within
certain regulatory limits, Security Financial may also invest a portion of its
assets in commercial paper and corporate debt securities. Savings institutions
like Security Financial are also required to maintain an investment in Federal
Home Loan Bank of Indianapolis stock. Security Financial is required under
federal regulations to maintain a minimum amount of liquid assets.

         Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that securities be
categorized as "held to maturity," "trading securities," or "available for
sale," based on management's intent as to the ultimate disposition of each
security. Statement of Financial Accounting Standards No. 115 allows debt
securities to be classified as "held to maturity" and reported in financial
statements at amortized cost only if the reporting entity has the positive
intent and ability to hold those securities to maturity. Securities that might
be sold in response to changes in market interest rates, changes in the
security's prepayment risk, increases in loan demand, or other similar factors
cannot be classified as "held to maturity." Debt and equity securities held for
current resale are classified as "trading securities." These securities are
reported at fair value, and unrealized gains and losses on the securities would
be included in earnings. Security Financial does not currently use or maintain a
trading account. Debt and equity securities not classified as either "held to
maturity" or "trading securities" are classified as "available for sale." These
securities are reported at fair value, and unrealized gains and losses on the
securities are excluded from earnings and reported, net of deferred taxes, as a
separate component of equity. At June 30, 2001, all of Security Financial's
mortgage-backed securities and investment securities were classified as
"available for sale."




                                       18
<PAGE>

         All of Security Financial's securities carry market risk insofar as
increases in market rates of interest may cause a decrease in their market
value. They also carry prepayment risk insofar as they may be called before
maturity in times of low market interest rates, so that Security Financial may
have to invest the funds at a lower interest rate. Security Financial's
investment policy permits engaging in hedging activities directly related to its
mortgage banking activities. Investments are made based on certain
considerations, which include the interest rate, yield, settlement date and
maturity of the investment, Security Financial's liquidity position, and
anticipated cash needs and sources. The effect that the proposed investment
would have on Security Financial's credit and interest rate risk and risk-based
capital is also considered. Security Financial purchases securities to provide
necessary liquidity for day-to-day operations. Security Financial also purchases
securities when investable funds exceed loan demand.

         The following table presents the amortized cost and fair value of
Security Financial's securities, by accounting classification and by type of
security, at the dates indicated.

<TABLE>
<CAPTION>

                                                                     2001                           2000
                                                          ---------------------------    --------------------------
                                                          AMORTIZED         FAIR         AMORTIZED         FAIR
                                                            COST            VALUE          COST            VALUE
                                                           ------          -------        ------          -------
<S>                                                      <C>             <C>            <C>            <C>
Securities available for sale:
    Obligations of U.S. Treasury and U.S. government
      securities                                         $    44,447     $    44,223    $    23,776    $    23,531

Mortgage-backed securities available for sale:
    Federal National Mortgage Association                      1,348           1,356          2,543          2,518
    Federal Home Loan Mortgage Corporation                       617             618          1,068          1,048
                                                         -----------     -----------    -----------    -----------
       Total                                                   1,965           1,974          3,611          3,566
                                                                         -----------                   -----------

Net unrealized losses on securities
  available for sale                                            (215)                          (290)
                                                         -----------                     -----------

    Total securities available for sale                  $    46,197     $    46,197    $    27,097    $    27,097
                                                         ===========     ===========    ===========    ===========

</TABLE>

         All of Security Financial's mortgage-backed securities are issued or
guaranteed by agencies of the U.S. Government. Accordingly, they carry lower
credit risk than mortgage-backed securities of a private issuer. However,
mortgage-backed securities still carry market risk, the risk that increases in
market interest rates may cause a decrease in market value, and prepayment risk,
the risk that the securities will be repaid before maturity and that Security
Federal will have to reinvest the funds at a lower interest rate.

         At June 30, 2001, Security Financial did not own any securities other
than U.S. Government and agency securities, which had an aggregate book value in
excess of 10% of Security Financial's retained earnings at that date.





                                       19
<PAGE>

         The following presents the activity in the mortgage-backed securities
and securities portfolios for the periods indicated.

<TABLE>
<CAPTION>

                                                                                         YEAR ENDED JUNE 30,
                                                                                        2001           2000
                                                                                        ----           ----
                                                                                           (IN THOUSANDS)
Mortgage-backed securities (1):
<S>                                                                                 <C>            <C>
    Mortgage-backed securities, beginning of period                                 $     3,566    $     3,980
    Purchases                                                                                 -            959
    Sales                                                                                     -              -
    Repayments and prepayments                                                           (1,646)        (1,318)
    Accretion of discount on securities                                                       -              -
    Increase (decrease) in unrealized gain                                                   54            (55)
                                                                                    -----------    -----------
       Net increase (decrease) in mortgage-backed securities                             (1,592)          (414)
                                                                                    -----------    -----------

Mortgage-backed securities, end of period                                           $     1,974    $     3,566
                                                                                    ===========    ===========

Securities (2):
    Securities, beginning of period                                                 $    23,531    $    13,893
    Purchases                                                                            53,083         20,624
    Sales                                                                                     -              -
    Maturities and calls                                                                (32,846)       (11,092)
    Accretion of discount on securities                                                     434            281
    Increase (decrease) in unrealized gain                                                   21           (175)
                                                                                    -----------    -----------
       Net increase (decrease) in securities                                             20,692          9,638
                                                                                    -----------    -----------

Securities, end of period                                                           $    44,223    $    23,531
                                                                                    ===========    ===========
</TABLE>

(1)  All mortgage-backed securities are classified as available for sale.
(2)  All securities are classified as available for sale.

         The following table presents certain information regarding the carrying
value (which equals fair value), weighted average yields, and maturities or
periods to repricing of Security Financial's debt securities at June 30, 2001,
all of which are available for sale.

<TABLE>
<CAPTION>

                                  LESS THAN             ONE TO           AFTER FIVE TO        AFTER
                                 ONE YEAR            FIVE YEARS           TEN YEARS          TEN YEARS            TOTALS
                            ------------------    ----------------     ---------------     --------------     ---------------
                            CARRYING   AVERAGE   CARRYING   AVERAGE   CARRYING  AVERAGE   CARRYING  AVERAGE   CARRYING AVERAGE
                             VALUE     YIELD      VALUE     YIELD      VALUE    YIELD      VALUE    YIELD      VALUE   YIELD
                             -----     -----      -----     -----      -----    -----      -----    -----      -----   -----
2001                                                      (DOLLARS IN THOUSANDS)
----
Securities available
  for sale:
   Investment securities
     Obligations of the
       U.S. Treasury and
       U.S. government
<S>                         <C>         <C>     <C>          <C>     <C>         <C>     <C>         <C>       <C>        <C>
       agencies             $ 2,990     6.22%   $ 2,001      6.50%   $16,971     7.06%   $22,261     7.23%     $44,223    7.07%
Mortgage-backed
  securities                      -         -         6      7.02        734     6.89      1,234     6.23        1,974    6.48
                            -------             -------               ------              ------               -------

   Totals                   $ 2,990     6.22%   $ 2,007      6.50%   $17,705     7.05%   $23,495     7.18%     $46,197    7.04%
                            =======  =======    =======   =======    =======  =======    =======  =======      ======== ======

2000
----
Securities available
  for sale:
   Investment securities
     Obligations of the
     U.S. Treasury and
       U.S. government
       agencies             $ 6,811     6.00%   $10,829      6.33%   $2,944      8.00%   $2,947      8.35%     $23,531    6.84%
Mortgage-backed
  securities                      -         -        11      7.01       455      8.01     3,100      6.23        3,566    6.46
                            -------             -------              ------              ------                -------

   Total                    $ 6,811     6.00%   $10,840      6.33%   $3,399      8.00%   $6,047      7.26%     $27,097    6.79%
                            ======== =======   ========   =======    ======   ========   =======  =======      ======== ======
</TABLE>

                                       20
<PAGE>

DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

         GENERAL. Deposits are the major external source of funds for Security
Federal's lending and other investment activities. In addition, Security Federal
also generates funds internally from loan principal repayments and prepayments
and maturing investment securities. Scheduled loan repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are influenced significantly by general interest rates and money market
conditions. Security Federal may use borrowings from the Federal Home Loan Bank
of Indianapolis to compensate for reductions in the availability of funds from
other sources. Presently, Security Federal has no other borrowing arrangements
aside from Federal Home Loan Bank of Indianapolis advances.

         DEPOSIT ACCOUNTS. A majority of Security Federal's depositors reside in
Indiana and Illinois. Security Federal's deposit products include savings
accounts, checking and NOW accounts, certificates of deposit, individual
retirement accounts, and money market accounts. Deposit account terms vary with
the principal differences being the minimum balance deposit, early withdrawal
penalties, and the interest rate. Security Federal reviews its deposit mix and
pricing weekly. Security Federal does not utilize brokered deposits and
currently does not and does not intend to solicit jumbo certificates of deposit
at rates above those available generally in the market.

         Security Federal believes that it is competitive in the interest rates
it offers on its deposit products. Security Federal determines the rates paid
based on a number of factors, including rates paid by competitors, Security
Federal's need for funds and cost of funds, borrowing costs, and movements of
market interest rates. Historically, Security Federal has relied predominately
on certificates of deposit with terms of more than one year.

         In the unlikely event Security Federal is liquidated, depositors will
be entitled to full payment of their deposit accounts before any payment is made
to Security Financial as the sole stockholder of Security Federal.

         The following table indicates the amount of Security Federal's jumbo
certificates of deposit by time remaining until maturity as of June 30, 2001.
Jumbo certificates of deposits have principal balances of $100,000 or more.

<TABLE>
<CAPTION>

                                                                    2001                          2000
                                                          ------------------------     -------------------------
                                                                        WEIGHTED                      WEIGHTED
          MATURITY                                                       AVERAGE                       AVERAGE
           PERIOD                                           AMOUNT        RATE            AMOUNT        RATE
                                                         ----------     ---------         -------      --------
<S>                                                       <C>                <C>       <C>                 <C>
    Three months or less                                  $   4,771          5.48%     $    4,904          5.37%
    Over three through six months                             4,747          5.40           2,817          5.61
    Over six through twelve months                            2,915          5.11           3,450          6.02
    Over twelve months                                        1,183          5.46             992          6.09
                                                          ---------                    ----------

       Total                                              $  13,616          5.37%     $   12,163          5.67%
                                                          =========     =========      ==========    ==========

</TABLE>






                                       21
<PAGE>
         The following table presents information concerning average balances
and rates paid on Security Federal's deposit accounts at the dates indicated.

<TABLE>
<CAPTION>
                                                             FOR THE YEAR ENDED JUNE 30,
                                      ----------------------------------------------------------------------------
                                                     2001                                    2000
                                      ----------------------------------    --------------------------------------
                                                    PERCENT                                 PERCENT
                                                   OF TOTAL     AVERAGE                    OF TOTAL       AVERAGE
                                        AVERAGE     AVERAGE      RATE          AVERAGE      AVERAGE        RATE
                                        BALANCE    DEPOSITS      PAID          BALANCE     DEPOSITS        PAID
                                       ---------   ----------   ------      ----------    ---------       -------

<S>                                   <C>               <C>          <C>    <C>               <C>          <C>
Savings accounts                      $   39,668        25.55%       2.37%  $   45,480        28.17%       2.40%
Money market accounts                      8,574         5.52        2.73        6,377         3.95        2.62
NOW accounts                               7,686         4.95        1.31        7,963         4.93        1.42
Certificates of deposit                   91,637        59.03        5.62       95,501        59.14        4.99
Non-interest-bearing deposits:
    Demand deposits                        7,674         4.95           -        6,156         3.81           -
                                      ----------    ---------               ----------    ---------

       Total average deposits         $  155,239       100.00%              $  161,477       100.00%
                                      ==========    =========               ==========    =========

</TABLE>


         DEPOSIT FLOW. The following table presents the balances, with interest
credited, and changes in dollar amounts of deposits in the various types of
accounts offered by Security Federal between the dates indicated.

<TABLE>
<CAPTION>
                                                                         YEAR ENDED JUNE 30,
                                             ---------------------------------------------------------------------
                                                               2001                                2000
                                             ---------------------------------------    --------------------------
                                                              PERCENT     INCREASE                       PERCENT
                                                AMOUNT       OF TOTAL    (DECREASE)         AMOUNT      OF TOTAL
                                               --------     ----------   ----------        --------    ----------
<S>                                          <C>                <C>      <C>            <C>                <C>
Savings accounts                             $    38,951        26.05%   $    (2,963)   $    41,914        27.65%
Money market deposits                              9,720         6.50          2,147          7,573         5.00
NOW accounts                                       4,471         2.99         (1,825)         6,296         4.15
Fixed-rate certificates maturing:
    Within 1 year                                 72,095        48.22          1,945         70,150        46.28
    After 1 year, but within 2 years              13,523         9.05           (368)        13,891         9.16
    After 2 years, but within 4 years              3,809         2.55         (2,807)         6,616         4.36
    After 4 years                                    554         0.37            (70)           624          .41
                                             -----------     --------    -----------    -----------     --------
       Total certificates                         89,981        60.19         (1,300)        91,281        60.21
Non-interest-bearing deposits:
    Demand deposits                                6,377         4.27          1,852          4,525         2.99
                                             -----------     --------    -----------    -----------     --------

    Total                                    $   149,500       100.00%   $    (2,089)   $   151,589       100.00%
                                             ===========     ========    ===========    ===========     ========
</TABLE>

         TIME DEPOSITS BY RATES AND MATURITIES. The following table presents the
amount of time deposits in Security Federal categorized by rates and maturities
at the dates indicated.

<TABLE>
<CAPTION>

                                     PERIOD TO MATURITY FROM JUNE 30, 2001                      AT
                    ---------------------------------------------------------------------
                     LESS THAN      1-2         2-3         3-4        AFTER                 JUNE 30,
                     ONE YEAR      YEARS       YEARS       YEARS      4 YEARS      TOTAL       2000
                     --------      -----       -----       -----      -------      -----       ----
<S>    <C>          <C>         <C>         <C>         <C>          <C>         <C>         <C>
0.00 - 4.00%        $   2,553   $       1   $       -   $       -    $      9    $  2,563    $     63
4.01 - 5.00%           25,431       2,867       1,156          46          83      29,583      14,521
5.01 - 6.00%           22,217       7,470       1,784         280         289      32,040      54,886
6.01 - 7.00%           21,844       3,165         216         327         173      25,725      21,674
Over 7.00%                 50          20           -           -           -          70         137
                    ---------   ---------   ---------   ---------    --------    --------    --------

    Total           $  72,095   $  13,523   $   3,156   $     653    $    554    $ 89,981    $ 91,281
                    =========   =========   =========   =========    ========    ========    ========

</TABLE>

         DEPOSIT  ACTIVITY.  The following table presents the deposit activity
of Security Federal for the periods indicated.
                                       22
<PAGE>

<TABLE>
<CAPTION>

                                                                                          YEAR ENDED JUNE 30,
                                                                                        2001            2000
                                                                                        ----            ----
                                                                                            (IN THOUSANDS)

<S>                                                                                  <C>            <C>
    Beginning balance                                                                $   151,589    $   165,894
    Net deposits (withdrawals) before interest credited                                   (8,510)       (19,634)
    Interest credited                                                                      6,421          5,329
                                                                                     -----------    -----------
    Net increase (decrease) in deposits                                                   (2,089)       (14,305)
                                                                                     -----------    -----------

       Ending balance                                                                $   149,500    $   151,589
                                                                                     ===========    ===========

</TABLE>

         BORROWINGS. Security Federal has the ability to use advances from the
Federal Home Loan Bank of Indianapolis to supplement its supply of lendable
funds and to meet deposit withdrawal requirements. The Federal Home Loan Bank of
Indianapolis functions as a central reserve bank providing credit for savings
associations and certain other member financial institutions. As a member of the
Federal Home Loan Bank of Indianapolis, Security Federal is required to own
capital stock in the Federal Home Loan Bank of Indianapolis and is authorized to
apply for advances on the security of the capital stock and certain of its
mortgage loans and other assets, principally securities that are obligations of
or guaranteed by the U.S. Government or its agencies, provided certain
creditworthiness standards have been met. Advances are made under several
different credit programs. Each credit program has its own interest rate and
range of maturities. Depending on the program, limitations on the amount of
advances are based on the financial condition of the member institution and the
adequacy of collateral pledged to secure the credit. At June 30, 2001, Security
Federal had the ability to borrow a total of approximately $38.4 million from
the Federal Home Loan Bank of Indianapolis. At that date, Security Federal had
$15.0 million of advances outstanding.

         The following tables presents certain information regarding Security
Federal's use of Federal Home Loan Bank of Indianapolis advances during the
periods and at the dates indicated.

<TABLE>
<CAPTION>

                                                                                          YEAR ENDED JUNE 30,
                                                                                          2001           2000
                                                                                          ----           ----
                                                                                        (DOLLARS IN THOUSANDS)

<S>                                                                                  <C>            <C>
    Maximum amount of advances outstanding at any month end                          $    15,000    $     5,000
    Approximate average advances outstanding                                               7,320          1,320
    Approximate weighted average rate paid on advances                                      5.04%          6.62%

                                                                                              AT JUNE 30,
                                                                                          2001           2000
                                                                                          ----           ----
                                                                                        (DOLLARS IN THOUSANDS)

    Balance outstanding at end of period                                             $    15,000    $         -
    Weighted average rate paid on advances                                                  5.05%           N/A

</TABLE>

TRUST SERVICES

         In 1997, Security Federal established a Trust Services department
within Security Federal, which provides trust and investment services to
individuals, partnerships, corporations, and institutions. Security Federal
believes that the trust department allows it to provide investment opportunities
and fiduciary services to both current and prospective customers. Consistent
with Security Federal's operating strategy, Security Federal will continue to
emphasize the growth of its trust service operations to grow assets and increase
fee-based income. Security Federal has implemented several policies governing
the practices and procedures of the trust department, including policies
relating to maintaining confidentiality of trust records, investment of trust
property, handling conflicts of interest, and maintaining impartiality. At June
30, 2001, the trust department managed 263 accounts with aggregate assets of
$8.7 million. The trust department is monitored by the Board of Directors' Trust
Committee.

                                       23
<PAGE>

PERSONNEL

         As of June 30, 2001, Security Federal had 58 full-time employees and
20 part-time employees, none of whom is represented by a collective bargaining
unit. Security Federal believes that its relationship with its employees is
good.

SUBSIDIARY ACTIVITIES

         Security Financial's sole subsidiary is Security Federal. The
following are descriptions of Security Federal's wholly owned subsidiaries.

         THE BOULEVARD, INC. The Boulevard, Inc. (Boulevard) was originally
formed in 1970 but later became inactive until 1999. It currently operates as a
wholly owned service corporation of Security Federal. Boulevard is a certified
insurance agent and currently acts as a sub-agent for other insurance agencies,
offering insurance products including property and casualty and life and health
insurance. Boulevard also intends to offer financial services in the near
future.

         OTHER  SUBSIDIARIES.  Security  Federal  has two other  wholly  owned
subsidiaries: Strategic Financial Corp. and Family Home Service Corp. Strategic
Financial Corp. and Family Home Service Corp. have both been inactive since
1997.


                           REGULATION AND SUPERVISION

GENERAL

         As a savings and loan holding company, Security Financial is required
by federal law to file reports with, and otherwise comply with, the rules and
regulations of the Office of Thrift Supervision. Security Federal is subject to
extensive regulation, examination, and supervision by the Office of Thrift
Supervision, as its primary federal regulator, and the Federal Deposit Insurance
Corporation, as the deposit insurer. Security Federal is a member of the Federal
Home Loan Bank System and, with respect to deposit insurance, of the Savings
Association Insurance Fund managed by the Federal Deposit Insurance Corporation.
Security Federal must file reports with the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other savings
institutions. The Office of Thrift Supervision and/or the Federal Deposit
Insurance Corporation conduct periodic examinations to test Security Federal's
safety and soundness and compliance with various regulatory requirements. This
regulation and supervision establishes a comprehensive framework of activities
in which an institution can engage and is intended primarily for the protection
of the insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulatory
requirements and policies, whether by the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation, or the Congress, could have a material
adverse impact on Security Financial, Security Federal, and their operations.
Certain of the regulatory requirements applicable to Security Federal and to
Security Financial are referred to below or elsewhere in this report. The
description of statutory provisions and regulations applicable to savings
institutions and their holding companies set forth in this report does not
purport to be a complete description of such statutes and regulations and their
effects on Security Federal and Security Financial.





                                       24
<PAGE>

HOLDING COMPANY REGULATION

         Security Financial is a nondiversified unitary savings and loan holding
company within the meaning of federal law. Under prior law, a unitary savings
and loan holding company, such as Security Financial was not generally
restricted as to the types of business activities in which it may engage,
provided that Security Federal continued to be a qualified thrift lender. See
"Federal Savings Institution Regulation - QTL Test." The Gramm-Leach-Bliley Act
of 1999 provides that no company may acquire control of a savings association
after May 4, 1999 unless it engages only in the financial activities permitted
for financial holding companies under the law or for multiple savings and loan
holding companies as described below. Security Financial will not qualify for
the grandfather and will be limited to such activities. Upon any non-supervisory
acquisition by Security Financial of another savings institution or savings bank
that meets the qualified thrift lender test and is deemed to be a savings
institution by the Office of Thrift Supervision, Security Financial would become
a multiple savings and loan holding company (if the acquired institution is held
as a separate subsidiary) and would generally be limited to activities
permissible for bank holding companies under Section 4(c)(8) of the Bank Holding
Company Act, subject to the prior approval of the Office of Thrift Supervision,
and certain activities authorized by Office of Thrift Supervision regulation.

         A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company, without prior written approval
of the Office of Thrift Supervision and from acquiring or retaining control of a
depository institution that is not insured by the Federal Deposit Insurance
Corporation. In evaluating applications by holding companies to acquire savings
institutions, the Office of Thrift Supervision considers the financial and
managerial resources and future prospects of Security Financial and the
institution involved, the effect of the acquisition on the risk to the deposit
insurance funds, the convenience and needs of the community, and competitive
factors.

         The Office of Thrift Supervision may not approve any acquisition that
would result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions: (i) the approval
of interstate supervisory acquisitions by savings and loan holding companies and
(ii) the acquisition of a savings institution in another state if the laws of
the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.

         Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, federal regulations do prescribe such restrictions
on subsidiary savings institutions as described below. Security Federal must
notify the Office of Thrift Supervision 30 days before declaring any dividend to
Security Financial. In addition, the financial impact of a holding company on
its subsidiary institution is a matter that is evaluated by the Office of Thrift
Supervision, and the agency has authority to order cessation of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.

FEDERAL SAVINGS INSTITUTION REGULATION

         BUSINESS ACTIVITIES. The activities of federal savings institutions are
governed by federal law and regulations. These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage. In particular, many types of lending authority for federal association
(E.G., commercial, non-residential real property loans and consumer loans) are
limited to a specified percentage of the institution's capital or assets.

         CAPITAL REQUIREMENTS. The Office of Thrift Supervision capital
regulations require savings institutions to meet three minimum capital
standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for
institutions receiving the highest rating on the CAMELS rating system), and an
8% risk-based capital ratio. In addition, the prompt corrective action standards
discussed below also establish, in effect, a minimum 2% tangible capital
standard, a 4% leverage ratio (3% for institutions receiving the highest rating
on the CAMEL financial institution rating system), and, together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
Office of Thrift Supervision regulations also require that, in meeting the
tangible, leverage, and risk-based capital standards, institutions must
generally deduct investments in and loans to subsidiaries engaged in activities
as principal that are not permissible for a national bank.

                                       25
<PAGE>

         The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the Office of Thrift Supervision capital
regulation based on the risks believed inherent in the type of asset. Core (Tier
1) capital is defined as common stockholders' equity (including retained
earnings), certain noncumulative perpetual preferred stock and related surplus,
and minority interests in equity accounts of consolidated subsidiaries less
intangibles other than certain mortgage servicing rights and credit card
relationships. The components of supplementary capital currently include
cumulative preferred stock, long-term perpetual preferred stock, mandatory
convertible securities, subordinated debt and intermediate preferred stock, the
allowance for loan and lease losses limited to a maximum of 1.25% of
risk-weighted assets and up to 45% of unrealized gains on available-for-sale
equity securities with readily determinable fair market values. Overall, the
amount of supplementary capital included as part of total capital cannot exceed
100% of core capital.

         The capital regulations also incorporate an interest rate risk
component. Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. For the present time, the Office of Thrift
Supervision has deferred implementation of the interest rate risk capital
charge. At June 30, 2001, Security Federal met each of its capital requirements.

         The following table presents Security Federal's capital position at
June 30, 2001.

<TABLE>
<CAPTION>

                                                                               EXCESS             CAPITAL
                                                                                           ----------------------
                                                 ACTUAL        REQUIRED     (DEFICIENCY)    ACTUAL      REQUIRED
                                                 CAPITAL        CAPITAL        AMOUNT       PERCENT      PERCENT
                                                 -------        -------        ------       -------      -------
                                                                       (Dollars in thousands)

<S>                                            <C>           <C>           <C>               <C>          <C>
Tier I Capital (to risk-weighted assets)       $  27,923     $    4,625    $   23,298        24.1%        4.0%

Core Capital (to adjusted assets)                 27,923          8,026        19,897        13.9         4.0

Total Capital (to risk-weighted assets)           29,129          9,250        19,879        25.2         8.0

</TABLE>

         PROMPT CORRECTIVE REGULATORY ACTION. The Office of Thrift Supervision
is required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
undercapitalization. Generally, a savings institution that has a ratio of total
capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core)
capital to risk-weighted assets of less than 4%, or a ratio of core capital to
total assets of less than 4% (3% or less for institutions with the highest
examination rating) is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a Tier 1
capital ratio of less than 3%, or a leverage ratio that is less than 3% is
considered to be "significantly undercapitalized," and a savings institution
that has a tangible capital to assets ratio equal to or less than 2% is deemed
to be "critically undercapitalized." Subject to a narrow exception, the Office
of Thrift Supervision is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the Office of Thrift
Supervision within 45 days of the date a savings institution receives notice
that it is "undercapitalized," "significantly undercapitalized," or "critically
undercapitalized." Compliance with the plan must be guaranteed by any parent
holding company. In addition, numerous mandatory supervisory actions become
immediately applicable to an undercapitalized institution, including, but not
limited to, increased monitoring by regulators and restrictions on growth,
capital distributions, and expansion. The Office of Thrift Supervision could
also take any one of a number of discretionary supervisory actions, including
the issuance of a capital directive and the replacement of senior executive
officers and directors.




                                       26
<PAGE>

         INSURANCE OF DEPOSIT ACCOUNTS. Security Federal is a member of the
Savings Association Insurance Fund. The Federal Deposit Insurance Corporation
maintains a risk-based assessment system by which institutions are assigned to
one of three categories based on their capitalization and one of three
subcategories based on examination ratings and other supervisory information. An
institution's assessment rate depends upon the categories to which it is
assigned. Assessment rates for Savings Association Insurance Fund member
institutions are determined semiannually by the Federal Deposit Insurance
Corporation and currently range from zero basis points for the healthiest
institutions to 27 basis points for the riskiest.

         In addition to the assessment for deposit insurance, institutions are
required to make payments on bonds issued in the late 1980s by the Financing
Corporation (FICO) to recapitalize the predecessor to the Savings Association
Insurance Fund. During 2001, FICO payments for Savings Association Insurance
Fund members approximated 2.1 basis points.

         The Federal Deposit Insurance Corporation has authority to increase
insurance assessments. A significant increase in Savings Association Insurance
Fund insurance premiums would likely have an adverse effect on the operating
expenses and results of operations of Security Federal. Management cannot
predict what insurance assessment rates will be in the future.

         Insurance of deposits may be terminated by the Federal Deposit
Insurance Corporation upon a finding that the institution has engaged in unsafe
or unsound practices; is in an unsafe or unsound condition to continue
operations; or has violated any applicable law, regulation, rule, order, or
condition imposed by the Federal Deposit Insurance Corporation or the Office of
Thrift Supervision. The management of Security Federal does not know of any
practice, condition, or violation that might lead to termination of deposit
insurance.

         LOANS TO ONE BORROWER. Federal law provides that savings institutions
are generally subject to the limits on loans to one borrower applicable to
national banks. A savings institution may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of its unimpaired capital
and surplus. An additional amount may be lent, equal to 10% of unimpaired
capital and surplus, if secured by specified readily-marketable collateral.

         QTL TEST. Federal law requires savings institutions to meet a qualified
thrift lender test. Under the test, a savings association is required to either
qualify as a "domestic building and loan association" under the Internal Revenue
Code or maintain at least 65% of its "portfolio assets" (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed securities) in at least 9 months
out of each 12-month period.

         A savings institution that fails the qualified thrift lender test is
subject to certain operating restrictions and may be required to convert to a
bank charter. As of June 30, 2001, Security Federal met the qualified thrift
lender test. Recent legislation has expanded the extent to which education
loans, credit card loans, and small business loans may be considered "qualified
thrift investments."

         LIMITATION ON CAPITAL DISTRIBUTIONS. Office of Thrift Supervision
regulations impose limitations upon all capital distributions by a savings
institution, including cash dividends, payments to repurchase its shares, and
payments to shareholders of another institution in a cash-out merger. Under the
current regulation, an application to and the prior approval of the Office of
Thrift Supervision is required prior to any capital distribution if the
institution does not meet the criteria for "expedited treatment" of applications
under Office of Thrift Supervision regulations (I.E., generally, examination
ratings in the two top categories); the total capital distributions for the
calendar year exceed net income for that year plus the amount of retained net
income for the preceding two years; the institution would be undercapitalized
following the distribution, or the distribution would otherwise be contrary to a
statute, regulation, or agreement with Office of Thrift Supervision. If an
application is not required, the institution must still provide prior notice to
the Office of Thrift Supervision of the capital distribution if, like Security
Federal, it is a subsidiary of a holding company. In the event Security
Federal's capital fell below its regulatory requirements or the Office of Thrift
Supervision notified it that it was in need of more than normal supervision,
Security Federal's ability to make capital distributions could be restricted. In
addition, the Office of Thrift Supervision could prohibit a proposed capital
distribution by any institution, which

                                       27
<PAGE>

would otherwise be permitted by the regulation, if the Office of Thrift
Supervision determines that such distribution would constitute an unsafe or
unsound practice.


         TRANSACTIONS WITH RELATED PARTIES. Security Federal's authority to
engage in transactions with "affiliates" (E.G., any company that controls or is
under common control with an institution, including Security Financial Bancorp
and its non-savings institution subsidiaries) is limited by federal law. The
aggregate amount of covered transactions with any individual affiliate is
limited to 10% of the capital and surplus of the savings institution. The
aggregate amount of covered transactions with all affiliates is limited to 20%
of the savings institution's capital and surplus. Certain transactions with
affiliates are required to be secured by collateral in an amount and of a type
described in federal law. The purchase of low quality assets from affiliates is
generally prohibited. The transactions with affiliates must be on terms and
under circumstances, that are at least as favorable to the institution as those
prevailing at the time for comparable transactions with non-affiliated
companies. In addition, savings institutions are prohibited from lending to any
affiliate which is engaged in activities that are not permissible for bank
holding companies and no savings institution may purchase the securities of any
affiliate other than a subsidiary.

         Security Federal's authority to extend credit to executive officers,
directors, and 10% shareholders ("insiders"), as well as entities such persons
control, is also governed by federal law. Such loans are required to be made on
terms substantially the same as those offered to unaffiliated individuals and
not involve more than the normal risk of repayment. Recent legislation created
an exception for loans made pursuant to a benefit or compensation program that
is widely available to all employees of the institution and does not give
preference to insiders over other employees. The law limits both the individual
and aggregate amount of loans Security Federal may make to insiders based, in
part, on Security Federal's capital position and requires certain board approval
procedures to be followed.

         ENFORCEMENT. The Office of Thrift Supervision has primary enforcement
responsibility over savings institutions and has the authority to bring actions
against the institution and all institution-affiliated parties, including
stockholders, and any attorneys, appraisers, and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers and/or
directors to institution of receivership, conservatorship or termination of
deposit insurance. Civil penalties cover a wide range of violations and can
amount to $25,000 per day, or even $1 million per day in especially egregious
cases. The Federal Deposit Insurance Corporation has the authority to recommend
to the Director of the Office of Thrift Supervision that enforcement action to
be taken with respect to a particular savings institution. If action is not
taken by the Director, the Federal Deposit Insurance Corporation has authority
to take such action under certain circumstances. Federal law also establishes
criminal penalties for certain violations.

         STANDARDS FOR SAFETY AND SOUNDNESS. The federal banking agencies have
adopted Interagency Guidelines prescribing Standards for Safety and Soundness.
The guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the Office of Thrift
Supervision determines that a savings institution fails to meet any standard
prescribed by the guidelines, the Office of Thrift Supervision may require the
institution to submit an acceptable plan to achieve compliance with the
standard.

FEDERAL HOME LOAN BANK SYSTEM

         Security Federal is a member of the Federal Home Loan Bank System,
which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan
Bank provides a central credit facility primarily for member institutions.
Security Federal, as a member of the Federal Home Loan Bank, is required to
acquire and hold shares of capital stock in that Federal Home Loan Bank in an
amount at least equal to 1.0% of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of each year
or 1/20 of its advances (borrowings) from the Federal Home Loan Bank, whichever
is greater. Security Federal was in compliance with this requirement with an
investment in Federal Home Loan Bank stock at June 30, 2001 of $5.3 million.

         The Federal Home Loan Banks are required to provide funds for the
resolution of insolvent thrifts in the late 1980s and to contribute funds for
affordable housing programs. These requirements could reduce the amount of

                                       28
<PAGE>

dividends that the Federal Home Loan Banks pay to their members and could also
result in the Federal Home Loan Banks imposing a higher rate of interest on
advances to their members. If dividends were reduced or interest on future
Federal Home Loan Bank advances increased, Security Federal's net interest
income would likely also be reduced. Recent legislation has changed the
structure of the Federal Home Loan Banks' funding obligations for insolvent
thrifts, revised the capital structure of the Federal Home Loan Banks, and
implemented entirely voluntary membership for Federal Home Loan Banks.
Management cannot predict the effect that these changes may have with respect to
its Federal Home Loan Bank membership.

FEDERAL RESERVE SYSTEM

         The Federal Reserve Board regulations require savings institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The regulations generally provide
that reserves be maintained against aggregate transaction accounts as follows: a
3% reserve ratio is assessed on transaction accounts over $5.5 million to and
including $42.8 million; a 10% reserve ratio is applied above $42.8 million. The
first $5.0 million of otherwise reservable balances (subject to adjustments by
the Federal Reserve Board) are exempted from the reserve requirements. The
accounts are adjusted annually. Security Federal complies with the foregoing
requirements.



                           FEDERAL AND STATE TAXATION

FEDERAL TAXATION

         GENERAL. Security Financial and Security Federal report their income on
a fiscal year ending June 30, consolidated basis using the accrual method of
accounting. The federal income tax laws apply to Security Financial and Security
Federal in the same manner as to other corporations with some exceptions,
including particularly Security Federal's reserve for bad debts discussed below.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to
Security Federal or Security Financial. Security Federal's federal tax returns
have been either audited or closed under the statute of limitations through tax
year ended June 30, 1996.

         BAD DEBT RESERVES. For fiscal years beginning before December 31, 1995,
thrift institutions that qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986, as amended, were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve. A reserve could be
established for bad debts on qualifying real property loans, generally secured
by interests in real property improved or to be improved, under the percentage
of taxable income method or the experience method. The reserve for nonqualifying
loans was computed using the experience method.

         Federal legislation enacted in 1996 repealed the reserve method of
accounting for bad debts for tax years beginning after 1995 and required savings
institutions to recapture or take into income certain portions of their
accumulated bad debt reserves. Thrift institutions eligible to be treated as
"small banks," those with assets of $500 million or less, are allowed to use the
experience method that applies to "small banks," while thrift institutions that
are treated as large banks, those with assets exceeding $500 million, are
required to use only the specific charge-off method. As a result, the percentage
of taxable income method of accounting for bad debts is no longer available for
any financial institution.

         A thrift institution required to change its method of computing
reserves for bad debts will treat the change as a change in method of
accounting, initiated by the taxpayer, and having been made with the consent of
the Internal Revenue Service. Any adjustment required to be taken into income
with respect to a change in accounting method generally will be taken into
income ratably over a six-taxable year period, beginning with the first taxable
year beginning after 1995, subject to a 2-year suspension if the "residential
loan requirement" is satisfied. Under the residential loan requirement
provision, the recapture required by the new legislation will be suspended for
each of two successive taxable years, beginning with Security Federal's 1996
taxable year, in which Security Federal originates a minimum of certain
residential loans based upon the average of the principal amounts of these loans
that Security Federal makes during its six taxable years preceding its current
taxable year.

                                       29
<PAGE>

         Security Federal is required to recapture or take into income over a
six year period the excess of the balance of its tax bad debt reserves as of
June 30, 1996 over the balance of the reserves as of June 30, 1988. As a result,
Security Federal will incur an additional tax liability of approximately
$224,000, beginning in 1998 over a six-year period.

         DISTRIBUTIONS. If Security Federal makes "non-dividend distributions"
to Security Financial, they will be considered to have been made from Security
Federal's unrecaptured tax bad debt reserves, including the balance of its
reserves as of June 30, 1988, to the extent of the "nondividend distributions"
and then from Security Federal's supplemental reserve for losses on loans, to
the extent of those reserves, and an amount based on the amount distributed but
not more than the amount of those reserves will be included in Security
Federal's income. Non-dividend distributions include distributions in excess of
Security Federal's current and accumulated earnings and profits, as calculated
for federal income tax purposes, distributions in redemption of stock, and
distributions in partial or complete liquidation. Dividends paid out of Security
Federal's current or accumulated earnings and profits will not be so included in
Security Federal's income.

         The amount of additional taxable income triggered by a non-dividend is
an amount that, when reduced by the tax attributable to the income, is equal to
the amount of the distribution. Therefore, if Security Federal makes a
non-dividend distribution to Security Financial, approximately one and one-half
times the amount of the distribution not in excess of the amount of the reserves
would be includable in income for federal income tax purposes, assuming a 34%
federal corporate income tax rate. Security Federal does not intend to pay
dividends that would result in a recapture of any portion of its bad debt
reserves.

         SAVINGS ASSOCIATION INSURANCE FUND RECAPITALIZATION ASSESSMENT. Federal
legislation enacted in 1996 levied a 65.7 cent fee on every $100 of thrift
deposits held on March 31, 1995. For financial statement purposes, this
assessment was reported as an expense for the quarter ended September 30, 1996.
The law includes a provision which states that the amount of any special
assessment paid to capitalize the Savings Association Insurance Fund under this
legislation is deductible in the year of payment.












                                       30
<PAGE>

STATE TAXATION

         Indiana imposes an 8.5% franchise tax based on a financial
institution's adjusted gross income as defined by statute. In computing adjusted
gross income, deductions for municipal interest, the bad debt deduction computed
using the reserve method, and pre-1990 net operating losses are disallowed.
Security Federal's state franchise tax returns have not been audited for the
past five tax years.

UTILIZATION OF OPERATING LOSS CARRYFORWARDS

         Security Federal had generated operating losses which were used to
offset and recoup tax liabilities from prior periods as allowed by the Internal
Revenue Code. The amount of operating losses not used are carried forward and
used to offset future tax liabilities until the deductions are exhausted.
Security Federal had operating loss carryforwards for Indiana income tax
purposes totalling $417,000 at June 30, 2000. These carryforwards, which expire
in 2013, were fully utilized during fiscal 2001.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth certain information regarding the
executive officers of Security Financial Bancorp and Security Federal.

NAME                      AGE(1)    POSITION HELD

John P. Hyland              50      Director, President, and Chief Executive
                                    Officer of Security Financial and Security
                                    Federal
Patrick J. Hunt             38      Executive Vice President and Chief Financial
                                    Officer of Security
                                       Financial and Security Federal
Joann Duhon                 44      Executive Vice President, Retail Banking,of
                                    Security Federal
John F. Nicholas            37      Executive Vice President, Business
                                    Development, of Security Federal
Kevin Dunn                  47      Executive Vice President, Audit/CRA/
                                    Compliance, of Security Federal
Joann Halterman             44      Vice President, Human Resources/Marketing,
                                    of Security Federal
Kent R. Huntoon             37      Vice President, The Boulevard, Inc., of
                                    Security Federal

(1) As of June 30, 2001.


         The executive officers of Security Financial and Security Federal are
elected annually and hold office until their successors have been elected and
qualified or until they are removed or replaced.


BIOGRAPHICAL INFORMATION

         Below is certain information regarding the directors and executive
officers of Security Federal. Unless otherwise stated, each director and
executive officer has held his or her current occupation for the last five
years.

         JOHN P. HYLAND has served as President and Chief Executive Officer of
Security Financial and Security Federal since September 1999 and October 1998,
respectively. Prior to joining Security Federal, Mr. Hyland served as Director,
President, and Chief Executive Officer of Southwest Financial Bank and Trust,
Orland Park, Illinois, and as Director and Vice President for Southwest
Financial Corporation, the holding company for Southwest Financial Bank and
Trust.





                                       31
<PAGE>

         PATRICK J. HUNT has served as Executive Vice President and Chief
Financial Officer of Security Financial and Security Federal since March 2001.
Prior to joining Security Federal, Mr. Hunt was employed by financial
institutions in positions of Chief Financial Officer, Banking Center President,
and Chief Operating Officer.

         JOANN DUHON joined Security Federal in 1996 as Assistant Vice
President, Regional Branch Manager. In July, 1997, Ms. Duhon was appointed
Executive Vice President, Retail Banking. Prior to joining Security Federal, Ms.
Duhon was a Branch Manager for Peoples Bank, East Chicago.

         JOHN F. NICHOLAS joined Security Federal in May 1996 as a Staff
Appraiser and, in November 1996, was appointed to Assistant Vice President and
CRA Officer. In 1997, Mr. Nicholas was appointed Manager, Residential
Construction Lending. In 1998, Mr. Nicholas was appointed Executive Vice
President, Mortgage Banking. In June 2000, Mr. Nicholas was appointed Executive
Vice President of Business Development. Prior to joining Security Federal, Mr.
Nicholas was a real estate appraiser with Richard Adomatis & Associates.

         KEVIN DUNN joined Security Federal in 1996 as an Assistant Vice
President. In May 1998, Mr. Dunn was appointed Interim President and Chief
Executive Officer, a position in which he served until October 1998. Since
October 1998, Mr. Dunn was appointed as Executive Vice President. Since June
2000, Mr. Dunn has served as Executive Vice President of Consumer and Real
Estate Lending. Prior to joining Security Federal, Mr. Dunn was a Certified
Thrift Examiner with the Office of Thrift Supervision, Central Region.

         JOANN HALTERMAN joined Security Federal in 1976 as a Teller. In 1998,
Ms. Halterman was appointed as Assistant Vice President, Human Resources and, in
February 1999, was appointed Vice President, Human Resources/Marketing.

         KENT R. HUNTOON  joined  Security  Federal in 1996 as Retail Sales
Manager, Trust Officer and Insurance Manager and Vice President and General
Manager of The Boulevard, Inc., a wholly owned subsidiary of Security Federal.
Prior to joining Security Federal, Mr. Huntoon served as a registered
representative of Prudential Insurance Co. of America.








                                       32
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTIES

         PROPERTIES

         The following table sets forth Security Federal's offices, as well as
certain additional information relating to these offices, as of June 30, 2001.

<TABLE>
<CAPTION>

                                                        ORIGINAL        DATE OF          NET BOOK
                                      LEASE OR         DATE LEASED       LEASE           VALUE OF
LOCATION                                OWNED           OR OWNED      EXPIRATION       PROPERTY (1)
--------                                -----           --------      ----------       ------------

MAIN OFFICE:

9321 Wicker Avenue
<S>                                   <C>               <C>            <C>            <C>
St. John, Indiana 46373                Owned             1988            N/A        $   4,014,747

BRANCH OFFICES:

2930 Ridge Road
Highland, Indiana 46322                Leased            1997           2019              280,634

2090 E. Commercial Avenue
Lowell, Indiana 46356                  Leased            1997           2012              186,136

7007 Calumet Avenue
Hammond, Indiana 46324                 Owned             1992            N/A              196,697

4518 Indianapolis Avenue
East Chicago, Indiana 46312            Owned             2000            N/A              565,627

552A Indian Boundary Road
Chesterton, Indiana 46304              Leased            1997           2007               64,070

</TABLE>

(1)  Represents the net book value of land, buildings, furniture, fixtures, and
     equipment owned by Security Federal.

         Security Federal also owns a property in Winfield Township, which is
located in Lake County, Indiana. The net book value of this property as of June
30, 2001 was $325,095.

ITEM 3.  LEGAL PROCEEDINGS

         Security Financial is not a party to any pending legal proceedings,
except as described below. Periodically, there have been various claims and
lawsuits involving Security Federal, such as claims to enforce liens,
condemnation proceedings on properties in which Security Federal holds security
interests, claims involving the making and servicing of real property loans, and
other issues incident to Security Federal's business. Security Federal is not a
party to any pending legal proceedings that it believes would have a material
adverse effect on the financial condition or operations of Security Federal.

         On August 22, 2001, PL Capital LLC and certain persons affiliated with
it (including two of Security Financial's present directors) filed a lawsuit in
the Court of Chancery of the State of Delaware against Security Financial and
its remaining directors styled PL CAPITAL LLC ET AL. V. BONAVENTURA, ET AL.,
Civil Action No. 19068 (the "Action"). The Action alleges that the Press Release
was not reported by any news service and that the date of the 2001 Meeting was
not otherwise disclosed to Security Financial's stockholders, and that the time
of stockholders to provide notices of business or nominations for the 2001
Meeting has not yet run. The Action was amended on September 4, 2001 and seeks
(i) a declaration that proper notice of the 2001 meeting has not been given,
that a press release issued by Security Financial subsequent to the initial
filing of the lawsuit was misleading and that the directors of Security
Financial (other than the plaintiffs) have breached their fiduciary duties, and
(ii) attorneys fees. The court ruled on this matter on September 28, 2001. The
ruling, among other things, requires the Company to accept Mr. Vincent Cainkar's
nominations for director for the 2001 meeting.

                                       33
<PAGE>



















                                       34
<PAGE>

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                     PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
             MATTERS

     The information under the sections titled "Stock Listing" and "Price Range
of Common Stock" on page 35 in Security Financial's 2001 Annual Report to
Stockholders is incorporated herein by reference.


ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The information under the section titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 6 through 13
in Security Financial's 2001 Annual Report to Stockholders is incorporated
herein by reference.


ITEM 7.      FINANCIAL STATEMENTS

     The information under the section titled "Consolidated Financial
Statements" on pages 14 through 33 in Security Financial's 2001 Annual Report to
Stockholders is incorporated herein by reference.


ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
             COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     The information under the sections titled "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in Security
Financial's Proxy Statement for the 2001 Annual Meeting of Stockholders is
incorporated herein by reference.

ITEM 10.     EXECUTIVE COMPENSATION

     The information under the section titled "Executive Compensation"  and
"Election of Direction-Directors' Compensation"in Security Financial's Proxy
Statement for the 2001 Annual Meeting of Stockholders is incorporated herein by
reference.

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information under the section titled "Stock Ownership" in Security
Financial's Proxy Statement for the 2001 Annual Meeting of Stockholders is
incorporated herein by reference.



                                       35
<PAGE>
ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information under the section titled "Transactions with Management" in
Security Financial's Proxy Statement for the 2001 Annual Meeting of Stockholders
is incorporated herein by reference.

ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K.

     (a)     (1)     The following are filed as a part of this report by means
                     of incorporation by reference to Security Financial's 2001
                     Annual Report to Stockholders:

                           o        Report of Independent Auditors

                           o        Consolidated Statements of Financial
                                    Condition as of June 30, 2001 and 2000

                           o        Consolidated Statements of Operations for
                                    the Years Ended June 30, 2001 and 2000

                           o        Consolidated Statements of Stockholders'
                                    Equity for the Years Ended June 30, 2001 and
                                    2000

                           o        Consolidated Statements of Cash Flows for
                                    the Years Ended June 30, 2001 and 2000

                           o        Notes to Consolidated Financial Statements

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

             (3)      Exhibits

                      3.1    Certificate of Incorporation of Security Financial
                             Bancorp, Inc.(1)
                      3.2    Amended Bylaws of Security Financial Bancorp, Inc.
                             (filed herewith)
                      4.0    Form of Stock Certificate of Security Financial
                             Bancorp, Inc. (1)
                      10.1   ESOP Loan Documents (2)
                      10.2   Employment  Agreement  between Security Federal
                             Bank & Trust and John P. Hyland (2)
                      10.3   Employment  Agreement  between  Security  Financial
                             Bancorp,  Inc. and John P. Hyland (2)
                      10.4   Security Federal Bank & Trust Employee Severance
                             Compensation Plan (2)
                      10.5   Security Financial Bancorp, Inc. Supplemental
                             Executive Retirement Plan (3)
                      10.6   Security Financial Bancorp, Inc. 2000 Stock-Based
                             Incentive Plan (4)
                      10.7   Employment  Agreement  between Security  Financial
                             Bancorp,  Inc. and Security Federal Bank & Trust
                             and Patrick J. Hunt (5)
                      13.0   Security Financial Bancorp, Inc. 2001 Annual Report
                             to Stockholders
                      21.0   Subsidiary  information is incorporated  herein by
                             reference to Part I, Item 1, "Business--Subsidiary
                             Activities"
                      23.0   Consent of independent auditors
                      ------------------
                      (1)    Incorporated  herein by reference from the Exhibits
                             to Form SB-2, Registration Statement and amendments
                             thereto, initially filed on September 20, 1999,
                             Registration No. 333-87397.
                      (2)    Incorporated herein by reference from the exhibits
                             to the Form 10-QSB for the quarter ended March 31,
                             2000, filed May 12, 2000.
                      (3)    Incorporated herein by reference from the exhibits
                             to the Form 10-KSB for the year ended June 30,2000,
                             filed September 28, 2000.
                      (4)    Incorporated herein by reference from the Company's
                             Definitive Proxy Statement for the 2000 Annual
                             Meeting of Stockholders, filed September 19, 2000.
                      (5)    Incorporated herein by reference from the exhibits
                             to the Form 10-QSB for the quarter ended March 31,
                             2001, filed May 15, 2001.

         (b)  Reports on Form 8-K

                      None.
                                       36
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                     SECURITY FINANCIAL BANCORP, INC.


Date: September 27, 2001             By:  /s/ John P. Hyland
                                          -------------------------------------
                                          John P. Hyland
                                          President and Chief Executive Officer

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>

      NAME                               TITLE                                          DATE
<S>                                     <C>                                      <C>
/s/ John P. Hyland                       President, Chief Executive               September 27, 2001
--------------------------------         Officer, and Director
John P. Hyland                           (principal executive officer)


/s/ Patrick J. Hunt                      Executive Vice President and             September 27, 2001
--------------------------------         Chief Financial Officer (principal
Patrick J. Hunt                          financial and accounting officer)


/s/ Mary Beth Bonaventura                Chairman of the Board                    September 27, 2001
--------------------------------
Mary Beth Bonaventura


/s/ Lawrence R. Parducci                 Vice Chairman of the Board               September 27, 2001
--------------------------------         and Corporate Secretary
Lawrence R. Parducci


/s/ Howard O. Cyrus, Sr.                 Director                                 September 27, 2001
--------------------------------
Howard O. Cyrus, Sr.


/s/ Dr. Peter Ferrini                    Director                                 September 27, 2001
--------------------------------
Dr. Peter Ferrini


/s/ Tula Kavadias                        Director                                 September 27, 2001
--------------------------------
Tula Kavadias


/s/ Robert L. Lauer                      Director                                 September 27, 2001
--------------------------------
Robert L. Lauer

</TABLE>



<PAGE>

<TABLE>
<CAPTION>

<S>                                     <C>                                      <C>
/s/ Philip T. Rueth                      Director                                 September 27, 2001
---------------------------------
Philip T. Rueth


/s/ Robert A. Vellutini                  Director                                 September 27, 2001
---------------------------------
Robert A. Vellutini


/s/ Richard J. Lashley                   Director                                 September 27, 2001
---------------------------------
Richard J. Lashley


/s/ John Wm. Palmer                      Director                                 September 27, 2001
---------------------------------
John Wm. Palmer

</TABLE>