Webster City Federal
                                    BANCORP





                               2000 Annual Report
<PAGE>



                       2000 ANNUAL REPORT TO STOCKHOLDERS
                          WEBSTER CITY FEDERAL BANCORP

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



                                Table of Contents

                                                                        Page

Message of President and Chief Executive Officer.....................     1

Selected Consolidated Financial and Other Data.......................     2

Key Financial Ratios and Other Data..................................     3

Management's Discussion and Analysis of Financial Condition..........     4
 and Results of Operations

Independent Auditors' Report.........................................    13

Consolidated Balance Sheets..........................................    14

Consolidated Statements of Operations................................    15

Consolidated Statements of Stockholders' Equity......................    16

Consolidated Statements of Cash Flows................................    17

Notes to Consolidated Financial Statements...........................    18

Stockholder Information..............................................    38

Directors and Executive Officers.....................................    39



<PAGE>
                [LETTERHEAD WEBSTER CITY FEDERAL BANCORP]

Dear Stockholders:

Year 2000 proved to be another  strong year for Webster  City  Federal  Bancorp,
with net income of  $1,300,600 or $.67 per share.  Return on average  assets was
1.39%.

The  Company   successfully   completed  the  repurchase  of  87,500  shares  of
outstanding  stock the first quarter of 2000,  with an additional 10% repurchase
of 78,000  shares  announced in the fourth  quarter of 2000.  The  repurchase of
outstanding  public  shares  continues  to be a good use of our  capital  in the
current rate environment.

With a healthy  local  economy,  loan  demand  remained  strong  in 2000.  Loans
receivable  increased by $6.9 million.  Loan losses remained at the lowest level
in our history. Deposits declined from the previous year, with a majority of the
decline  being  public  funds.  A  source  of  funding  for  lending  and  stock
repurchases was FHLB advances, which were much more cost effective to use.

Customer service has always been a priority of the Company.  Our  knowledgeable,
friendly staff puts customers first - they are our future.

Webster City Federal welcomed Dr. Leo Moriarty,  a local dentist,  as a director
in the fourth  quarter of 2000.  We are  pleased to have Dr.  Moriarty  with the
Company as we look to the future.

The Company purchased Security Title & Abstract Company,  a well-known  abstract
company, in September. Security Title operates as a subsidiary of the Bancorp.

We thank each of you for being a part of Webster City Federal Bancorp. We intend
to continue to look for  opportunities  to utilize our capital  position for the
benefit of our  shareholders  - but intend to do so  cautiously  to protect  the
strength of the organization.

Sincerely,


/s/Phyllis A. Murphy
--------------------
Phyllis A. Murphy
President

<PAGE>
Selected Consolidated Financial and Other Data

         The following table sets forth certain consolidated financial and other
data of Webster City Federal  Bancorp (the  "Company")  at the dates and for the
periods indicated.  For additional  information about the Company,  reference is
made to "Management's Discussion and Analysis of Financial Condition and Results
of  Operations"  and the  Consolidated  Financial  Statements of the Company and
related notes included elsewhere herein. Table 1
<TABLE>
<CAPTION>

Selected Financial Condition Data

                                                                          At December 31,
                                                    -------------------------------------------------------------
                                                      2000        1999          1998         1997        1996
                                                    -------      -------      -------      -------      -------
                                                                          (In Thousands)
<S>                                                 <C>          <C>          <C>          <C>          <C>
Total assets                                        $95,430      $94,525      $94,084      $95,024      $93,810
Loans receivable, net
    Real estate                                      63,831       58,592       53,084       50,431       49,876
    Consumer and other                                5,273        3,600        3,668        3,891        4,277
                                                    -------      -------      -------      -------      -------
    Total loans receivable, net                      69,104       62,192       56,752       54,322       54,153

Mortgage-backed securities                            6,025        7,806        9,987       14,923       18,579
Investments                                          11,887       14,916        9,899       16,637       14,957
Cash and cash equivalents                             6,251        4,986       13,187        5,893        3,759
Deposits                                             65,146       67,918       68,704       71,527       70,952
Stockholders' equity, substantially restricted       20,905       22,348       23,086       22,350       21,769

</TABLE>

Summary of Operations
<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                                       -----------------------------------------------------------
                                                        2000         1999         1998          1997        1996
                                                       -------      -------      -------      -------      -------
                                                          (Dollars in thousands, except earnings per share
                                                                  and cash dividends per share amounts)

<S>                                                    <C>          <C>          <C>          <C>          <C>
Interest income                                        $ 6,702      $ 6,410      $ 6,646      $ 6,740      $ 6,707
Interest expense                                         3,301        3,010        3,339        3,364        3,447
                                                       -------      -------      -------      -------      -------
   Net interest income before provision
     for loan losses                                     3,401        3,400        3,307        3,376        3,260
Provision for loan losses                                   --           --           --           40          125

                                                       -------      -------      -------      -------      -------
   Net interest income after provision

     for loan losses                                     3,401        3,400        3,307        3,336        3,135
                                                       -------      -------      -------      -------      -------
Noninterest income:
  Service charges and other fees                           181          162          188          157          159
  Other income                                             166           51           56           48           59

                                                       -------      -------      -------      -------      -------
   Total noninterest income                                347          213          244          205          218
Noninterest expense:
  Salaries and employee benefits                           892          811          789          723          702
  Premises and equipment                                   131          117           79           95           86
  Other real estate expenses, net                            1            2            2            5          (29)
  Advertising                                               27           29           27           28           31
  Federal deposit insurance premiums                        14           40           43           36          170
 Special insurance assessment                               --           --           --           --          502
  Other                                                    591          585          492          493          440
                                                       -------      -------      -------      -------      -------
    Total noninterest expense                            1,656        1,584        1,432        1,380        1,902

                                                       -------      -------      -------      -------      -------
Income before income taxes and accounting changes        2,092        2,029        2,119        2,161        1,451
Income tax expense                                         791          780          803          797          542

                                                       -------      -------      -------      -------      -------
                                                       -------      -------      -------      -------      -------
  Net income                                           $ 1,301      $ 1,249      $ 1,316      $ 1,364      $   909
                                                       =======      =======      =======      =======      =======


Earnings per share - basic                             $  0.67      $  0.60      $  0.63      $  0.66      $  0.44
                                                       =======      =======      =======      =======      =======

Earnings per share - diluted                           $  0.67      $  0.60      $  0.62      $  0.65      $  0.44
                                                       =======      =======      =======      =======      =======


Cash dividends per share                               $  0.80      $  0.80      $  0.80      $  0.80      $  0.75
                                                       =======      =======      =======      =======      =======
</TABLE>
<PAGE>

Key Financial Ratios and Other Data

<TABLE>
<CAPTION>

                                                           At or for the Year Ended December 31,
                                             ----------------------------------------------------------------------
                                                 2000           1999         1998             1997            1996
                                                 ----           ----         ----             ----            ----
<S>                                           <C>            <C>          <C>              <C>             <C>
Equity to assets at year end                    21.91%         23.64%       24.54%           23.52%          23.21%
Net interest spread                              2.60%          2.61%        2.39%            2.51%           2.39%
Net interest margin                              3.72%          3.72%        3.56%            3.65%           3.48%
Return on average assets                         1.39%          1.39%        1.39%            1.45%           0.95%
Return on average equity                         6.17%          5.49%        5.79%            6.19%           4.20%
Stockholders' equity to average assets ratio    22.40%         23.98%       24.36%           23.70%          22.71%
Noninterest income to average assets ratio       0.35%          0.22%        0.26%            0.22%           0.24%
Noninterest expense to average assets ratio      1.64%          1.69%        1.52%            1.47%           2.00%
Nonperforming loans to net loans                 0.29%          0.01%        0.03%            0.00%           0.05%
Nonperforming assets to total assets             0.21%          0.01%        0.04%            0.06%           0.14%
Average interest-earning assets to
  average interest-bearing liabilities         131.21%        133.80%      132.50%          131.37%         129.77%
Allowance for loan losses to
  net loans receivable                           0.59%          0.61%        0.68%            0.71%           0.67%
Allowance for loan losses to
  nonperforming loans                              N/M            N/M          N/M              N/M             N/M

Net interest income to noninterest expense     205.31%        214.71%      230.78%          248.26%         171.46%

Number of full service offices                       1              1            1                1               1

</TABLE>

   N/M = Not Meaningful

                                       3
<PAGE>

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


General

         Webster City  Federal  Bancorp  (the  "Company")  is a savings and loan
holding company whose primary asset is 100% of the outstanding shares of Webster
City  Federal  Savings Bank (the  "Bank"),  which  reorganized  into the holding
company   structure,   effective   July  1,  1999.   In  the   holding   company
reorganization,  each outstanding share of the Bank's common stock was converted
into one share of the  Company's  common  stock by  operation  of law,  and each
stockholder  of the Bank  received  the same  ownership  interest in the Company
immediately following the holding company reorganization as he or she had in the
Bank immediately prior to that transaction. The discussion herein to the results
of the Company refers to the results of the Bank in the periods prior to July 1,
1999.

           The  Company  focuses  on  establishing  and  maintaining   long-term
relationships with customers,  and is committed to serving the financial service
needs of the  communities  in its  market  area.  The  Company  attracts  retail
deposits from the general public and uses those deposits, together with borrowed
funds, to originate residential mortgage loans, equity loans and consumer loans.

         The  Company's  current  business  strategy is to operate the Bank as a
well-capitalized,  profitable and  independent  community-oriented  savings bank
dedicated to providing  quality  customer  service.  Generally,  the Company has
sought to implement this strategy  primarily by using retail  deposits and, to a
lesser extent, public funds as its source of funds and maintaining a substantial
part of its assets in loans  secured  by one- to  four-family  residential  real
estate located in the Company's market area, home equity loans,  consumer loans,
mortgage-backed   securities   and  in  other  liquid   investment   securities.
Specifically,   the  Company's  business  strategy  incorporates  the  following
elements: (1) operating the Bank as a community-oriented  financial institution,
maintaining  a strong  core  customer  base by  providing  quality  service  and
offering  customers  the  access  to  senior  management  and  services  that  a
community-based  institution can offer;  (2)  maintaining  high asset quality by
emphasizing investment in residential mortgage loans, mortgage-backed securities
and other  securities  issued or guaranteed  by the United States  Government or
agencies thereof;  (3) maintaining capital in excess of regulatory  requirements
and growing only to the extent that adequate  capital  levels can be maintained;
and (4) managing interest rate risk exposure while achieving desirable levels of
profitability.

         The  earnings  of the  Company  depend  primarily  on its  level of net
interest  income,  which is the difference  between  interest  earned on the its
interest-earning  assets,  consisting  primarily of mortgage loans,  home equity
loans, consumer loans, mortgage-backed securities,  interest-bearing deposits at
other  institutions,  investment  securities  and  other  investments,  and  the
interest paid on interest-bearing liabilities, which consist of savings deposits
and advances from the Federal Home Loan Bank. Net interest  income is a function
of the  Company's  interest  rate spread,  which is the  difference  between the
average  yield  earned on  interest-earning  assets and the average rate paid on
interest-bearing  liabilities,  as well as a function of the average  balance of
interest-earning  assets  as  compared  to  interest-bearing   liabilities.  The
Company's  earnings  also  are  affected  by its  level of  non-interest  income
including  primarily  service  fees  and  charges,  and  non-interest   expense,
including  primarily  compensation  and  employee  benefits,  and  SAIF  deposit
insurance premiums.  Earnings of the Company also are affected  significantly by
general  economic and  competitive  conditions,  particularly  changes in market
interest rates, government policies and actions of regulatory authorities, which
events are beyond the control of the Company.


Comparison of Financial Condition

         Total assets increased  $905,000,  or .9%, to $95.4 million at December
31, 2000 from $94.5  million at December  31, 1999.  Deposits  decreased by $2.8
million,  or 4.1%,  to $65.1  million at December 31, 2000 from $67.9 million at
December  31,  1999.  The decrease was mainly due to a reduction of public funds
when the Company  did not  recieive  the bid for renewal of the funds.  Cash and
cash  equivalents  increased  by $1.3  million,  or 25.4%,  to $6.3  million  on
December 31, 2000 from $5.0  million at December 31, 1999.  The company had time
deposits of $2.6 million in other  financial  institutions  mature and the funds
were  held  in a cash  account  at the  end of  2000.  Investments  (other  than
mortgage-backed  securities)  decreased $3.0 million, or 20.1%, to $11.9 million
at December 31, 2000 from $14.9 million at December 31, 1999, due to the company
selling $3.0 million of  securities  during the last quarter of 2000.  Net loans
receivable  increased $6.9 million,  or 11.1%,  to $69.1 million at December 31,
2000 from  $62.2  million  at  December  31,  1999.  Mortgage-backed  securities


                                       4
<PAGE>
decreased $1.8 million, or 22.8%, to $6.0 million at December 31, 2000 from $7.8
million at  December  31,  1999,  due to payments  of  principal.  There were no
additional mortgage-backed securities purchased during the year.


         Stockholders'  equity  decreased  by $1.4  million,  or 6.3%,  to $20.9
million at  December  31,  2000 from $22.3  million at December  31,  1999.  The
decrease in  stockholders'  equity was due to cash  dividends of $647,500  being
paid to the  stockholders  and the stock  repurchase of 142,400 shares of common
stock for $2.1 million, which more than offset net income of $1.3 million.


Results of Operations

         General.  The earnings of the Company depend  primarily on its level of
net interest  income,  which is the difference  between  interest  earned on the
Company's  interest-earning assets, consisting primarily of mortgage loans, home
equity loans, consumer loans, mortgage-backed securities,  investment securities
and other investments,  and the interest paid on  interest-bearing  liabilities,
which  consisting of savings  deposits,  FHLB advances and, to a lesser  extent,
public  funds.  The  Company  had net income of $1.3  million for the year ended
December 31, 2000  compared to $1.2  million,  and $1.3  million,  for the years
ended December 31, 1999, and 1998, respectively.


Average Balance Sheet

         The  following  table sets forth  certain  information  relating to the
Company's  average  balance  sheet and reflects the average  yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods  presented.  Average  balances  are  derived  from  month-end  balances.
Management does not believe that the use of month-end balances rather than daily
average  balances  has  caused  any  material   difference  in  the  information
presented.

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                            ---------------------------------------------------------------------------------------
                                                        2000                        1999                           1998
                                            ---------------------------------------------------------------------------------------
                                                                           (Dollars in Thousands)
                                                                 Average                     Average                        Average
                                            Average              Yield/   Average            Yield/     Average              Yield/
                                            Balance    Interest    Cost   Balance  Interest     Cost     Balance   Interest    Cost
                                            -------    --------    ----   -------  --------     ----     -------   --------    ----
<S>                                         <C>       <C>         <C>     <C>       <C>         <C>     <C>        <C>        <C>
Interest-earning assets:
   Loans receivable, net                    $66,222   $ 5,150     7.78%   $58,312   $ 4,502     7.72%   $55,704    $ 4,309    7.74%
   Mortgage-backed securities                 6,741       464     6.88%     9,006       571     6.34%    12,313        856    6.95%
   Investment securities                     14,643       875     5.98%    15,183       924     6.09%    14,560        959    6.59%
   Other interest earning assets              3,779       213     5.64%     8,670       413     4.76%    10,310        522    5.06%
                                            -------   -------             -------   -------             -------    -------
       Total interest-earning assets         91,385     6,702     7.33%    91,171     6,410     7.03%    92,887      6,646    7.15%
Other noninterest-earning assets              1,954                         2,004                         1,887
      Total assets                          $93,339                       $93,175                       $94,774
Interest-bearing liabilities:
   Deposits                                  64,743     3,018     4.40%    66,531     2,924     4.40%    68,701      3,270    4.76%
   Borrowings                                 4,909       283     5.76%     1,608        86     5.35%     1,401         69    4.93%
                                            -------   -------             -------   -------             -------    -------
      Total interest-bearing liabilities     69,652     3,301     4.74%    68,139     3,010     4.42%    70,102      3,339
Noninterest-bearing liabilities               2,606                         2,256                         1,946
                                            -------                       -------                       -------
      Total liabilities                      72,258                        70,395                        72,048
Stockholders' equity                         21,081                        22,780                        22,726
                                            -------                       -------                       -------
      Total liabilities and
            stockholders' equity            $93,339                       $93,175                       $94,774
                                            =======                       =======                       =======
Net interest income                                   $ 3,401                       $ 3,400                       $ 3,307
                                                      =======                       =======                       =======
Net interest rate spread                                          2.59%                         2.61%                         2.39%
                                                                =======                       ======                        ======
Net interest margin (1)                                           3.72%                         3.72%                         3.56%
                                                                =======                       ======                        ======
Ratio of average interest-earning assets to
   average interest-bearing liabilities                         131.21%                       133.80%                       132.50%
                                                                =======                       ======                        ======
</TABLE>

(1) Net  interest  margin  represents  net  interest  income  divided by average
interest-earning assets.



                                       5
<PAGE>

Rate/Volume Analysis

         The table below sets forth  certain  information  regarding  changes in
interest income and interest  expense of the Company for the periods  indicated.
For each category of interest-earning  assets and interest-bearing  liabilities,
information is provided on changes attributable to (i) changes in average volume
(changes  in  average  volume  multiplied  by old rate);  (ii)  changes in rates
(changes  in rate  multiplied  by old  average  volume);  (iii) the net  change.
Changes attributable to both rate and volume have been allocated proportionately
to the change due to volume and the change due to rate.

<TABLE>
<CAPTION>
                                                Years Ended December 31,             Years Ended December 31,
                                             --------------------------------------------------------------------
                                                      2000 vs 1999                         1999 vs 1998
                                             --------------------------------    --------------------------------
                                                    Increase/                         Increase/
                                                   (Decrease)                        (Decrease)
                                                     Due to           Total            Due to            Total
                                             -------------------    Increase     -------------------    Increase
                                             Volume       Rate     (Decrease)    Volume       Rate      (Decrease)
                                             ------       ----     ----------    ------       ----      ----------
                                                    (In Thousands)                       (In Thousands)
<S>                                           <C>         <C>         <C>         <C>         <C>         <C>
 Interest income:
   Investment securities                      ($ 32)      ($ 17)      ($ 49)      $  40       ($ 75)      ($ 35)
   Loans receivable, net                        615          33         648         201          (8)        193
   Mortgage-backed securities                  (153)         46        (107)       (215)        (70)       (285)
   Other interest earning assets               (265)         65        (200)        (79)        (30)       (109)
                                              -----       -----       -----       -----       -----       -----
      Total interest-earning assets           $ 165       $ 127       $ 292       ($ 53)      ($183)      ($236)
                                              -----       -----       -----       -----       -----       -----

Interest-bearing liabilities:
   Deposits                                     (81)        175          94        (161)       (185)       (346)
   Borrowings                                   190           7         197         108         (91)         17
                                              -----       -----       -----       -----       -----       -----
      Total interest-bearing liabilities      $ 109       $ 182       $ 291       ($ 53)      ($276)      ($329)
                                              -----       -----       -----       -----       -----       -----

 Net change in interest income:               $  56       ($ 55)      $   1       $   0       $  93       $  93
                                              =====       =====       =====       =====       =====       =====
</TABLE>

                                       6
<PAGE>
Comparison  of  Operating  Results  for the Years  Ended  December  31, 2000 and
December 31, 1999.

         Interest Income. Total interest income increased by $291,700,  or 4.6%,
to $6.7  million for the year ended  December 31, 2000 from $6.4 million for the
year ended December 31, 1999. The increase in interest income resulted primarily
from  the  increase  in  the  volume  of  the  Bank's  interest-earning  assets.
Increasing  market interest rates was the major cause in the increase in average
yield on interest-earning  assets. Average  interest-earning assets increased by
$214,000  to  $91.4  million  from  $91.2  million.   The  increase  in  average
interest-earning  assets resulted primarily from an increase of $7.9 million, or
13.6%,  in the average balance of net loans  receivable  offset by a decrease of
$2.3 million or 25.2% in average balance of  mortgage-backed  securities,  and a
$4.9   million,   or  56.4%,   decrease   in  the   average   balance  of  other
interest-earning assets, as management sought to increase the average balance of
higher yielding loans.

         Interest income on loans receivable increased by $647,200, or 14.4%, to
$5.2 million for the year ended December 31, 2000 from $4.5 million for the year
ended  December 31, 1999.  This increase in interest  income was the result of a
net increase in average loans  outstanding  for 2000 as compared to 1999, due to
increased loan originations.  The average yield on the loan portfolio  increased
to 7.78% for the year  ended  December  31,  2000 from  7.72% for the year ended
December 31,  1999.  The Company uses a lagging  index for its  adjustable  rate
loans and this caused the  overall  yield on the loan  portfolio  to increase in
2000 compared to 1999. Interest income on mortgage-backed  securities  decreased
by $107,000,  or 18.7%,  to $464,300.  This decrease in interest income resulted
from a  decrease  in  average  mortgage-backed  securities  outstanding  of $2.3
million,  or 25.2%  offset by a  increase  in average  yield on  mortgage-backed
securities to 6.88% from 6.34% due to higher market interest rates.

         Interest  Expense.  Total interest  expense  increased by $290,900,  or
9.7%, to $3.3 million for the year ended December 31, 2000 from $3.0 million for
the year ended  December  31,  1999.  The  principal  reason for the increase in
interest  expense was an increase the amount of borrowing the Company had during
2000  compared to 1999.  Borrowing  increased  by $5.0 million or 156.3% to $8.2
million at December 31, 2000 from $3.2 million at December 31, 1999. The average
yield on  borrowings  increased by 41 basis points to 5.76% for 2000 as compared
to 5.35% for 1999.

         Net Interest  Income.  Net interest income  remained  unchanged at $3.4
million for the year ended December 31, 2000 and for the year ended December 31,
1999. The principal reason for net interest income remaining  unchanged was that
the Company's interest rate spread remained  essentially  unchanged at 2.60% for
2000 compared to 2.61% for 1999.

         Non-interest  Income.  Non-interest  income  increased by $115,400,  or
54.2%,  to $328,600 for the year ended December 31, 2000,  from $213,100 for the
same period ended December 31, 1999. The increase in non-interest income was due
to increased  fees and a deficiency  settlement  from a lawsuit of $25,100 and a
one time state  refund of $45,200  in  September  for a tax refund for the years
1991-1994 on interest earned outside the state of Iowa.

         Non-interest  Expense.  Non-interest  expense increased by $77,100,  or
4.9%, to $1.7 million for the year ended December 31, 2000 from $1.6 million for
the year ended December 31, 1999.  Non-interest  expense  consists  primarily of
salaries and employee  benefits,  premises and  occupancy  costs,  furniture and
equipment expense,  data processing expense, SAIF deposit insurance premiums and
stock related expenses.

                                       7
<PAGE>

         Provision for Loan Losses.  The Company maintains an allowance for loan
losses based upon  management's  evaluation of risks in the loan portfolio,  the
Company's past loan loss  experience,  and current and expected  future economic
conditions.  The  Company  had no  provision  for loan losses for the year ended
December 31, 2000 or in 1999.  Management  believes that its provisions for loan
losses have maintained its allowance for loan losses at a level that is adequate
to provide for loan losses,  although there can be no assurance that such losses
will not exceed estimated amounts.

A summary of the allowance for loan losses follows:

<TABLE>
<CAPTION>

                                                 December 31
--------------------------------------------------------------------------------
                                         2000           1999             1998
--------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>
Balance beginning of year              382,403         385,188         385,149

Charge offs:
    Auto loans                               0          (5,153)           (197)
    Other                               (1,968)         (4,110)           (528)
--------------------------------------------------------------------------------

                                        (1,968)         (9,263)           (725)
Recoveries:
    Residential                         22,500               0               0
    Other                                  550           6,478             764
--------------------------------------------------------------------------------

                                        23,050           6,478             764
--------------------------------------------------------------------------------

Net charge-offs                         21,082          (2,785)             39
--------------------------------------------------------------------------------

Additions charged to operations              0               0               0
--------------------------------------------------------------------------------

Balance end of year                    403,485         382,403         385,188
================================================================================
Ratio of net charge-offs during
the period to average loans
outstanding during the period              .01%            .01%            .00%
================================================================================
</TABLE>

The allocation of the allowance for loan losses follows:
<TABLE>
<CAPTION>
                                                                          December 31
                                                        ---------------------------------------------------
                                                         2000                 1999                  1998
                                                         ----                 ----                  ----
<S>                                                     <C>                   <C>                 <C>
           Balance at end of period applicable to
               Unallocated                              403,485               382,402             385,188
                                                        ---------------------------------------------------

                                                        403,485               382,402             385,188
                                                        ===================================================

</TABLE>

         Income  Taxes.  Income tax expense  increased by $11,000,  or 1.4%,  to
$791,000 for the year ended  December 31, 2000 from $780,000 for the same period
in 1999. The effective tax rate for 2000 was 37.8% compared to 38.4% for 1999.

                                       8
<PAGE>

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

         Interest Income. Total interest income decreased by $236,000,  or 3.6%,
to $6.4  million for the year ended  December 31, 1999 from $6.6 million for the
year ended December 31, 1998. The decrease in interest income resulted primarily
from the decrease in average yield on the Company's  interest-earning  assets to
7.03% from 7.15%.  Declining  market  interest rates were the major cause of the
decrease in average yield on interest-earning  assets. Average  interest-earning
assets  decreased  by $1.7  million to $91.2  million  from $92.9  million.  The
decrease in average  interest-earning  assets resulted primarily from a decrease
of $3.3 million, or 26.9%, in the average balance of mortgage-backed  securities
and  a  decrease  of  $1.6  million  or  15.9%  in  average   balance  of  other
interest-earning  assets,  offset by a $2.6  million,  or 4.7%,  increase in the
average balance of net loans receivable.

         Interest  income on real estate and other loans  increased by $193,000,
or 4.5%, to $4.5 million for the year ended  December 31, 1999 from $4.3 million
for the year ended December 31, 1998.  This increase in interest  income was the
result of a net increase in average  loans  outstanding  for 1999 as compared to
1998,  due to  increased  loan  originations.  The  average  yield  on the  loan
portfolio decreased to 7.72% for the year ended December 31, 1999 from 7.74% for
the year ended  December  31,  1998.  The Company  uses a lagging  index for its
adjustable rate loans and this caused the overall yield on the loan portfolio to
decrease in 1999 compared to 1998. Refinancing of existing loans and lower rates
being  offered  on new loans  also  caused  the yield on our loan  portfolio  to
decline. Interest income on mortgage-backed securities decreased by $285,000, or
33.3%, to $571,300.  The decrease in interest income resulted from a decrease in
average  mortgage-backed  securities outstanding of $3.3 million, or 26.9% and a
decrease in average yield on mortgage-backed  securities to 6.34% from 6.95% due
to lower market interest rates.

         Interest  Expense.  Total interest  expense  decreased by $329,000,  or
9.8%, to $3.0 million for the year ended December 31, 1999 from $3.3 million for
the year ended  December  31,  1998.  The  principal  reason for the decrease in
interest  expense  was a decrease  in the  balance of average  deposits  of $2.1
million,  or 3.2%, to $66.5 million for year ended  December 31, 1999 from $68.7
million for year ended  December  31, 1998.  At the same time the average  rates
paid on  deposits  dropped  to 4.39%  from  4.76%  the prior  year.  Part of the
decrease in deposit  interest expense was offset by an increase in the Company's
borrowings. The Company borrowed an additional $2.0 million in October 1999 at a
rate of 5.55% which increased the Company's interest expense.

         Net Interest Income. Net interest income increased by $93,000, or 2.8%,
to $3.4 million for the year ended December 31, 1999,  from $3.3 million for the
year ended  December  31,  1998.  The  principal  reason for the increase in net
interest  income was an increase in the Company's  interest rate spread to 2.61%
from 2.39%,  and an increase in the Company's ratio of average  interest-earning
assets to average interest-bearing liabilities.

         Non-interest  Income.  Non-interest  income  decreased  by $31,000,  or
12.7%,  to $213,000 for the year ended December 31, 1999,  from $244,000 for the
same period ended December 31, 1998. The decrease in non-interest income was due
to decreased fees from loan activities.

         Non-interest  Expense.  Non-interest expense increased by $150,700,  or
10.5%,  to $1.6  million for the year ended  December 31, 1999 from $1.4 million
for the year ended December 31, 1998. Non-interest expense consists primarily of
salaries and employee  benefits,  premises and  occupancy  costs,  furniture and
equipment expense,  data processing expense, SAIF deposit insurance premiums and
stock related  expenses.  Compensation and benefit costs increased due to salary
increases  and the Bank  paying off its ESOP loan of  approximately  $159,000 on
June 30, 1999.

         Income  Taxes.  Income tax expense  decreased by $23,000,  or 2.9%,  to
$780,000 for the year ended  December 31, 1999 from $803,000 for the same period
in 1998. The effective tax rate for 1999 was 38.4% compared to 37.9% in 1998.



                                       9
<PAGE>
Market Risk Management

Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk is comprised primarily of interest rate risk resulting
from its core banking  activities of lending and deposit  taking.  Interest rate
risk is the risk that changes in market  interest rates might  adversely  affect
the  Company's  net interest  income or the economic  value of its  portfolio of
assets,  liabilities,  and off-balance sheet contracts.  Management  continually
develops  and applies  strategies  to mitigate  this risk.  Management  does not
believe that the Company's  primary market risk exposure and how those exposures
were managed in 2000 have changed when compared to 1999.
 Market risk limits have been established by the Board of Directors based on the
Company's tolerance for risk.

The Company's policy in recent years has been to reduce its exposure to interest
rate risk generally by better  matching the maturities and interest rates of its
interest rate sensitive  assets and  liabilities  by  emphasizing  ARM loans and
fixed-rate one-to-four-family mortgage loans with terms of 15 years or less, and
by maintaining relatively high levels of liquidity. By maintaining a significant
percentage  of its assets in cash and other liquid  investments,  the Company is
able to reinvest a higher  percentage  of its assets more quickly in response to
changes in market interest rates, thereby reducing its exposure to interest rate
volatility.  In  addition,  the  Company  offers  competitive  rates on  deposit
accounts and prices certificates of deposit to provide customers with incentives
to choose certificates of deposit with longer terms.

The Company primarily relies on the OTS Net Portfolio Value Model (the Model) to
measure its  susceptibility to interest rate changes.  Net portfolio value (NPV)
is defined as the present value of expected net cash flows from  existing  asset
minus the present  value of expected  net cash flows from  existing  liabilities
plus or minus  the  present  value of net  expected  cash  flows  from  existing
off-balance  sheet contracts.  The Model estimates the current economic value of
each type of asset,  liability,  and  off-balance  sheet  contract after various
assumed  instantaneous,  parallel shifts in the Treasury yield curve both upward
and downward.

The NPV Model uses an option-based  pricing approach to value one-to-four family
mortgages,  mortgages  serviced by or for others,  and firm  commitments to buy,
sell,  or  originate  mortgages.  This  approach  makes use of an interest  rate
simulation  program to generate  numerous  random  interest  rate paths that, in
conjunction with a prepayment  model, are used to estimate  mortgage cash flows.
Prepayment  options and interest rate caps and floors contained in mortgages and
mortgage-related  securities introduce significant uncertainty in estimating the
timing  of cash  flows  for  these  instruments  that  warrants  the use of this
sophisticated  methodology.  All other financial  instruments are valued using a
static  discounted cash flow method.  Under this approach,  the present value is
determined by discounting  the cash flows the instrument is expected to generate
by the yields currently  available to investors from an instrument of comparable
risk and duration.

The following table sets forth the present value estimates for major  categories
of financial  instruments  of the Company at December 31, 2000, as calculated by
the OTS NPV Model.  The table shows the present value of the  instruments  under
rate shock  scenarios of -300 basis points to +300 basis points in increments of
100 basis  points.  As  illustrated  in the  table,  the  Company's  NPV is more
sensitive in a rising rate scenario than in a falling rate  scenario.  As market
rates  increase,  the market value of the Company's  large portfolio of mortgage
loans and securities  declines  significantly  and prepayments slow. As interest
rates  decrease,   the  market  value  of  mortgage  loans  and  mortgage-backed
securities  increase less  dramatically  due to prepayment  risk,  periodic rate
caps, and other embedded options.



                                       10
<PAGE>

Actual changes in market value will differ from estimated  changes in this table
due to various risks and uncertainties.

<TABLE>
<CAPTION>
                                      Present Value Estimates by Interest Rate Scenario
                                                Calculated at September 2000

                                       -300 bp      -200 bp     -100 bp         0 bp      +100 bp      +200 bp      +300 bp
                                      --------       ------      ------       ------       ------       ------       ------
                                                                      (Dollars in Thousands)
Financial Instrument:
<S>                                   <C>            <C>         <C>          <C>          <C>          <C>          <C>
Mortgage loans and securities         $ 73,612       72,258      70,892       69,050       66,902       64,685       62,491
Non-mortgage loans                       4,808        4,719       4,633        4,550        4,469        4,392        4,316
Cash, deposits and securities           17,677       17,591      17,507       17,196       16,789       16,397       16,018
Other assets                               721        1,012       1,384        1,823        2,236        2,625        2,994
                                      --------       ------      ------       ------       ------       ------       ------

Total assets                            96,818       95,580      94,416       92,619       90,396       88,099       85,819
                                      --------       ------      ------       ------       ------       ------       ------

Deposits                                66,506       65,956      65,418       64,892       64,379       63,876       63,385
Borrowings                               5,632        5,369       5,128        4,904        4,699        4,508        4,332
Other liabilities                          115          112         109          106          103          100           98
                                      --------       ------      ------       ------       ------       ------       ------

Total liabilities                       72,253       71,437      70,655       69,902       69,181       68,484       67,815

Commitments                                 69           50          33            7          (28)         (66)        (101)
                                      --------       ------      ------       ------       ------       ------       ------

Net portfolio value                   $ 24,634       24,193      23,794       22,724       21,187       19,549       17,903
                                      ========       ======      ======       ======       ======       ======       ======
Net portfolio value ratio               25.44%       25.31%      25.20%       24.53%       23.44%       22.19%       20.86%
                                      ========       ======      ======       ======       ======       ======       ======
NPV minimum board limit                 23.00%       22.00%      21.00%       20.00%       19.00%       18.00%       17.00%
                                      ========       ======      ======       ======       ======       ======       ======

</TABLE>

Liquidity and Capital Resources

         The Company is required to maintain  minimum levels of liquid assets as
defined by OTS regulations.  This  requirement,  which varies from time to time,
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term  borrowings.  The Company's  liquidity ratio averaged
24.98% during the month of December 2000.  Liquidity  ratios  averaged 25.5% for
the three months ended  December 31,  2000.  The Company  adjusts its  liquidity
levels in order to meet  funding  needs of  deposit  outflows,  payment  of real
estate taxes on mortgage  loans,  repayment of borrowings and loan  commitments.
The  Company  also  adjusts  liquidity  as  appropriate  to meet its  asset  and
liability management objectives.

         The Company's  primary sources of funds are deposits,  amortization and
repayment of loans and  mortgage-backed  securities,  maturities  of  investment
securities  and  other  investments,   and  earnings  and  funds  provided  from
operations.  While scheduled  principal  repayments on loans and mortgage-backed
securities are a relatively  predictable source of funds, deposit flows and loan
prepayments  are  greatly   influenced  by  general  interest  rates,   economic
conditions, and competition.  The Company manages the pricing of its deposits to
maintain  a desired  deposit  balance.  In  addition,  the  Company  invests  in
short-term  interest-earning  assets,  which  provide  liquidity to meet lending
requirements.  At December 31, 2000,  $6.4 million,  or 35.1%,  of the Company's
investment portfolio (including cash, deposits in other financial  institutions,
FHLB stock,  and securities) was scheduled to mature in one year or less,  $10.5
million,  or 57.2%,  was  scheduled  to mature  in one to five  years,  and $1.4
million or 7.7%, was scheduled to mature in over five years.  Assets  qualifying
for liquidity  outstanding at December 31, 2000 amounted to $18.2  million.  For
additional information about cash flows from the Company's operating, financing,
and  investing  activities,  see  Statements  of  Cash  Flows  included  in  the
Consolidated Financial Statements.

                                       11
<PAGE>

         A major  portion of the Company's  liquidity  consists of cash and cash
equivalents,  which are a product of its  operating,  investing,  and  financing
activities.  The primary sources of cash are net earnings,  principal repayments
on loans and  mortgage-backed  securities,  and  increases in deposit  accounts.
Liquidity  management  is  both a  daily  and  long-term  function  of  business
management.  If the Company  requires  funds beyond its ability to generate them
internally,  it may borrow from the FHLB, which provides an additional source of
funds.

         At December 31, 2000, the Company had core capital of $20.4 million, or
21.4% of adjusted total assets,  which was approximately $16.6 million above the
minimum  requirements  of 4.0%, of adjusted total assets in effect on that date.
On  December  31,  2000,  the Company had  risk-based  capital of $20.7  million
(including  $20.4  million in  risk-based  capital),  or 45.1% of  risk-weighted
assets of $46.2 million.  This amount was $17.1 million above the 8% requirement
in effect on that date.  The Company is presently in  compliance  with the fully
phased-in capital requirements.

         At December 31, 2000, the Company had outstanding  loan  commitments of
$198,700. This amount does not include $928,000 of the unfunded portion of loans
in process. Certificates of deposit scheduled to mature in less than one year as
of  December  31,  2000,  totaled  $26.8  million.  Based on  prior  experience,
management believes that a significant portion of such deposits will remain with
the Company.

Impact of Inflation and Changing Prices

         The Consolidated Financial Statements of the Company and notes thereto,
presented  elsewhere  herein,  have been prepared in accordance  with  generally
accepted  accounting  principles,  which  require the  measurement  of financial
position  and  operating   results  in  terms  of  historical   dollars  without
considering the change in the relative  purchasing  power of money over time and
due to inflation.  The impact of inflation is reflected in the increased cost of
the  Company's  operations.  Unlike most  industrial  companies,  nearly all the
assets and liabilities of the Company are monetary. As a result,  interest rates
have a greater  impact  on the  Company's  performance  than do the  effects  of
general levels of inflation.  Interest rates do not necessarily move in the same
direction or to the same extent as the price of goods and services.

Impact of New Accounting Standards

         SFAS  133,   "Accounting   for  Derivative   Instruments   and  Hedging
Activities,"  and SFAS 137 was adopted by the Company for the quarter  beginning
October 1, 2000. The impact of adoption was not material.

         SFAS 140,  Accounting  for Transfers and Servicing of Financial  Assets
and  Extinguishments  of Liabilities" was issued in September 2000, and replaces
SFAS 125 of the same title.  SFAS 140 revises the standards for  accounting  for
securitizations  and other  transfers of  financial  assets and  collateral  and
requires certain disclosures,  but it carries over most of SFAS 125's provisions
without  reconsideration.  The  adoption  of SFAS 140 is not  expected to have a
material  impact on the results of  operations  or  financial  condition  of the
Company.

Safe Harbor Statement

         This report  contains  certain  forward-looking  statements  within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking  statements  contained in the Private  Securities  Reform Act of
1995,  and is  including  this  statement  for  purposes  of these  safe  harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally  identifiable  by use  of the  words  "believe,"  "expect,"  "intend,"
"anticipate,"  "estimate,"  "project"  or  similar  expressions.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse effect on the
operations and future prospects of the Company and the subsidiaries include, but
are not limited to, changes in: interest rates, general economic conditions, the
legislative/regulatory  situation,  monetary  and  fiscal  policies  of the U.S.
Government,  including  polices of the U.S.  Treasury  and the  Federal  Reserve
Board, the quality of composition of the loan or investment  portfolios,  demand
for loan products, deposit flows, competition,  demand for financial services in
the Company's  market area and accounting  principles,  policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such  statements.  Further
information  concerning  the  Company  and its  business,  including  additional
factors  that  could  materially  affect the  Company's  financial  results,  is
included in the Company's filings with the Securities and Exchange Commission.

                                       12
<PAGE>



                          Independent Auditors' Report



     The Board of Directors
     Webster City Federal Bancorp
     Webster City, Iowa:


     We have audited the  accompanying  consolidated  balance  sheets of Webster
     City Federal Bancorp and subsidiaries as of December 31, 2000 and 1999, and
     the related consolidated  statements of operations,  stockholders'  equity,
     and  cash  flows  for  each of the  years in the  three-year  period  ended
     December  31,  2000.  These  consolidated   financial  statements  are  the
     responsibility  of  the  Company's  management.  Our  responsibility  is to
     express an opinion on these consolidated  financial statements based on our
     audits.

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

     In our opinion,  the consolidated  financial  statements  referred to above
     present fairly, in all material respects, the financial position of Webster
     City Federal Bancorp and subsidiaries as of December 31, 2000 and 1999, and
     the results of their  operations and their cash flows for each of the years
     in the  three-year  period  ended  December 31, 2000,  in  conformity  with
     accounting principles generally accepted in the United States of America.

                                                                     /s/KPMG LLP
                                                                     -----------
                                                                        KPMG LLP

     Des Moines, Iowa
     January 19, 2001


                                       13
<PAGE>
<TABLE>
<CAPTION>
                                             WEBSTER CITY FEDERAL BANCORP
                                                   AND SUBSIDIARIES

                                              Consolidated Balance Sheets

                                              December 31, 2000 and 1999


                                         Assets                                            2000              1999
                                                                                      ------------       ------------

<S>                                                                                   <C>                   <C>
Cash and cash equivalents                                                             $  6,250,706          4,986,099
Time deposits in other financial institutions                                                   --          2,585,000
Securities available-for-sale (note 2)                                                  11,517,920                 --
Securities held-to-maturity (market value of $6,397,578
    in 2000 and $22,129,444 in 1999) (note 2)                                            6,393,740         22,721,595
Loans receivable, net (notes 3, 4 and 7)                                                69,104,213         62,192,330
Federal Home Loan Bank (FHLB) stock, at cost                                               613,200            613,200
Office property and equipment, net (note 5)                                                494,804            485,085
Deferred taxes on income (note 8)                                                          203,000            156,000
Accrued interest receivable (notes 2 and 3)                                                670,379            761,267
Prepaid expenses and other assets                                                          181,649             24,513
                                                                                      ------------       ------------

                                                                                      $ 95,429,611         94,525,089
                                                                                      ============       ============

                          Liabilities and Stockholders' Equity

Deposits (note 6)                                                                     $ 65,145,809         67,918,202
FHLB advance (note 7)                                                                    8,200,000          3,200,000
Advance payments by borrowers for taxes and insurance                                      316,766            274,377
Accrued interest payable (note 6)                                                           50,855            122,212
Current income taxes payable (note 8)                                                       90,119             27,458
Accrued expenses and other liabilities (note 9)                                            721,158            634,535
                                                                                      ------------       ------------


            Total liabilities                                                           74,524,707         72,176,784
                                                                                      ------------       ------------

Stockholders' equity (note 10):
    Serial preferred stock, $.10 par value;  authorized  10,000,000 shares, none
    issued -- -- Common stock,  $.10 par value;  authorized  20,000,000  shares,
    2,122,216 issued
      and 1,883,078 outstanding in 2000 and 2,122,216 issued and 2,025,278
      outstanding in 1999                                                                  212,222            212,222
    Additional paid-in capital                                                           9,093,681          9,093,681
    Retained earnings, substantially restricted                                         15,181,410         14,518,728
    Unrealized loss on securities available-for-sale                                       (34,833)                --
    Treasury stock, 239,138 and 96,938 shares in 2000 and 1999, respectively            (3,547,576)        (1,476,326)
                                                                                      ------------       ------------

            Total stockholders' equity                                                  20,904,904         22,348,305
                                                                                      ------------       ------------

Commitments and contingencies (notes 3 and 13)

            Total liabilities and stockholders' equity                                $ 95,429,611         94,525,089
                                                                                      ============       ============

</TABLE>

See accompanying notes to consolidated financial statements.


                                       14
<PAGE>
<TABLE>
<CAPTION>

                                            WEBSTER CITY FEDERAL BANCORP
                                                  AND SUBSIDIARIES

                                       Consolidated Statements of Operations

                                   Years ended December 31, 2000, 1999, and 1998


                                                                           2000             1999           1998
                                                                        ----------      ----------      ----------
<S>                                                                     <C>              <C>             <C>
Interest income:
   Loans receivable                                                     $5,149,323       4,502,081       4,309,340
   Mortgage-backed and related securities                                  464,265         571,316         856,476
   Investment securities                                                   875,385         923,589         959,443
   Other interest earning assets                                           213,131         413,440         521,092
                                                                        ----------      ----------      ----------

           Total interest income                                         6,702,104       6,410,426       6,646,351
                                                                        ----------      ----------      ----------

Interest expense:
   Deposits (note 6)                                                     3,018,113       2,924,174       3,269,914
   FHLB advances (note 7)                                                  282,746          80,699          54,766
   ESOP loan (note 9)                                                           --           5,086          14,182
                                                                        ----------      ----------      ----------

           Total interest expense                                        3,300,859       3,009,959       3,338,862
                                                                        ----------      ----------      ----------

           Net interest income                                           3,401,245       3,400,467       3,307,489

Provision for losses on loans (note 4)                                          --              --              --
                                                                        ----------      ----------      ----------

           Net interest income after provision for losses on loans
                                                                         3,401,245       3,400,467       3,307,489
                                                                        ----------      ----------      ----------

Noninterest income:
   Fees and service charges                                                181,329         162,211         188,123
   Gain on sale of securities                                               18,500              --              --
   Other                                                                   147,233          50,929          56,296
                                                                        ----------      ----------      ----------

           Total noninterest income                                        347,062         213,140         244,419
                                                                        ----------      ----------      ----------

Noninterest expense:
   Compensation, payroll taxes, and employee benefits (note 9)             891,530         810,858         789,227
   Advertising                                                              26,678          28,712          27,346
   Office property and equipment                                           131,331         117,286          79,250
   Federal insurance premiums                                               13,985          39,832          43,012
   Data processing services                                                119,071         113,219         101,780
   Other real estate expenses, net                                             993           1,654           2,049
   Other                                                                   473,089         472,365         390,516
                                                                        ----------      ----------      ----------

           Total noninterest expense                                     1,656,677       1,583,926       1,433,180
                                                                        ----------      ----------      ----------

           Earnings before taxes on income                               2,091,630       2,029,681       2,118,728

Taxes on income (note 8)                                                   791,000         780,000         803,000
                                                                        ----------      ----------      ----------

           Net earnings                                                 $1,300,630       1,249,681       1,315,728
                                                                        ==========      ==========      ==========

Earnings per share - basic (note 1)                                     $     0.67            0.60            0.63
                                                                        ==========      ==========      ==========

Earnings per share - diluted (note 1)                                   $     0.67            0.60            0.62
                                                                        ==========      ==========      ==========

</TABLE>

See accompanying notes to consolidated financial statements.



                                       15
<PAGE>
<TABLE>
<CAPTION>

                                            WEBSTER CITY FEDERAL BANCORP
                                                  AND SUBSIDIARIES

                                   Consolidated Statements of Stockholders' Equity

                                    Years ended December 31, 2000, 1999 and 1998




                                                                                                            Accumulated
                                                                         Additional               Unearned      other
                                                Common      Treasury      paid-in     Retained      ESOP    comprehensive
                                                 stock        stock       capital     earnings     shares       loss         Total
                                                 -----        -----       -------     --------     ------       ----         -----
<S>                                            <C>         <C>           <C>          <C>           <C>        <C>       <C>
Balance at December 31, 1997                   $ 210,938           --    8,912,656    13,463,193    236,483)       --    22,350,304

Net earnings                                          --           --           --     1,315,728         --        --     1,315,728
Exercise of options (6,610 shares)                   661           --       61,177            --         --        --        61,838
Stock appreciation of allocated ESOP shares           --           --       38,854            --         --        --        38,854
Principal reduction                                   --           --           --            --     77,419        --        77,419
Dividends paid on common stock                        --           --           --      (758,408)        --        --      (758,408)

Balance at December 31, 1998                     211,599           --    9,012,687    14,020,513   (159,064)       --    23,085,735

Net earnings                                          --           --           --     1,249,681         --        --     1,249,681
Exercise of options (6,229 shares)                   623           --       71,933            --         --        --        72,556
Stock appreciation of allocated ESOP shares           --           --        9,061            --         --        --         9,061
Principal reduction                                   --           --           --            --    159,064        --       159,064
Repurchase of common stock (96,938 shares)            --   (1,476,326)          --            --         --        --    (1,476,326)
Dividends paid on common stock                        --           --           --      (751,466)        --        --      (751,466)

Balance at December 31, 1999                     212,222   (1,476,326)   9,093,681    14,518,728         --        --    22,348,305

Comprehensive income:
   Net income                                         --           --           --     1,300,630         --        --     1,300,630
   Unrealized loss on securities
            available-for-sale                        --           --           --            --    (34,833)   (34,833)

        Total comprehensive income                    --           --           --     1,300,630         --    (34,833)   1,265,797

Repurchase of common stock (142,400 shares)                (2,071,250)                                                   (2,071,250)
Dividends paid on common stock                        --           --           --      (637,948)        --         --     (637,948)

Balance at December 31, 2000                    $ 212,222  (3,547,576)    9,093,681   15,181,410        --     (34,833)  20,904,904

</TABLE>

See accompanying notes to consolidated financial statements.

                                       16



<PAGE>
<TABLE>
<CAPTION>

                                              WEBSTER CITY FEDERAL BANCORP
                                                    AND SUBSIDIARIES

                                          Consolidated Statements of Cash Flows

                                            Years ended 2000, 1999, and 1998

                                                                                     2000        1999           1998
                                                                                 -----------   ---------     ----------
<S>                                                                              <C>           <C>            <C>
Cash flows from operating activities:
   Net earnings                                                                  $ 1,300,630   1,249,681      1,315,728
                                                                                 -----------   ---------     ----------

  Adjustments to reconcile net earnings to net cash provided by
       operating activities:
     Depreciation and amortization                                                    90,874      57,582         41,822
     Gain on sale of real estate, net                                                     --          --         (3,227)
     Earned but unallocated shares of ESOP                                                --     159,064         77,419
     Stock appreciation of allocated ESOP shares                                          --       9,061         38,854
     Change in:
       Accrued interest receivable                                                    90,888     (97,619)         5,289
       Prepaid expenses and other assets                                              (6,911)     36,441        (16,393)
       Accrued interest payable                                                      (71,357)     11,819          2,029
       Accrued expenses and other liabilities                                         85,995      80,724         48,083
       Accrued taxes on income                                                        44,661     (24,096)        (9,549)
       Deferred taxes on income                                                      (29,000)    (19,000)       (48,000)
                                                                                 -----------   ---------     ----------

          Total adjustments                                                          205,150     213,976        136,327
                                                                                 -----------   ---------     ----------

          Net cash provided by operating activities                                1,505,780   1,463,657      1,452,055
                                                                                 -----------   ---------     ----------

Cash flows from investing activities:
   Proceeds from maturity of time deposits in other financial institutions         2,585,000   3,111,000      1,085,000
   Proceeds from the maturity of investment securities held to maturity                   --   4,900,000     16,650,000
   Proceeds from sales of securities available-for-sale, net                       2,996,700          --             --
   Purchase of investment securities held to maturity                                     --   (9,905,814)   (9,902,281)
   Purchase of time deposits                                                              --   (3,431,000)   (2,265,000)
   Principal collected on mortgage-backed securities                               1,766,477   3,226,586      4,905,638
   Purchase of mortgage-backed securities                                                 --   (1,070,487)           --
   Net change in loans receivable                                                  (6,904,897) (5,431,628)   (2,488,656)
   Proceeds from the sale of real estate                                                  --      22,460        113,967
   Purchase of office property and equipment                                         (57,432)    (40,619)        (9,990)
   Proceeds on sale of FHLB stock                                                         --          --        166,300
                                                                                 -----------   ---------     ----------

          Net cash (used in) provided by investing activities                        385,848   (8,619,502)    8,254,978
                                                                                 -----------   ---------     ----------

Cash flows from financing activities:
   Net change in deposits                                                          (2,772,393)  (785,386)    (2,823,575)
   Net (decrease) increase in advance payments by borrowers
      for taxes and insurance                                                          42,389      54,794        (15,485)
   Proceeds from FHLB advance                                                      5,000,000   2,000,000      1,200,000
   Investment in subsidiary                                                         (187,819)         --             --
   Repurchase of common stock                                                      (2,071,250) (1,476,326)           --
   ESOP costs                                                                             --    (159,064)       (77,419)
   Proceeds on stock options                                                              --      72,556         61,838
   Dividends paid                                                                   (637,948)   (751,466)      (758,408)
                                                                                 -----------   ---------     ----------

          Net cash used in financing activities                                     (627,021)  (1,044,892)   (2,413,049)
                                                                                 -----------   ---------     ----------

          Net (decrease) increase in cash and cash equivalents                     1,264,607   (8,200,737)    7,293,984

Cash and cash equivalents at beginning of year                                     4,986,099   13,186,836     5,892,852
                                                                                 -----------   ---------     ----------

Cash and cash equivalents at end of year                                         $ 6,250,706   4,986,099     13,186,836
                                                                                 ===========   =========     ==========

Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
     Interest                                                                    $ 3,372,216   2,998,140      3,336,833
     Taxes on income                                                                 744,483     821,582        861,066
   Loan originated to facilitate sale of real estate                                      --          --         73,918
                                                                                  ===========   =========     ==========
</TABLE>
See accompanying notes to consolidated financial statements.

                                       17

<PAGE>

                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998



  (1)   Summary of Significant Accounting Policies and Practices

        Description of Business

        Webster City Federal Bancorp (the Company) and its subsidiaries, Webster
        City Federal  Savings Bank (the Bank) and Security  Title and  Abstract,
        Inc.,   conduct  operations  in  Webster  City,  Iowa,  a  community  of
        approximately  8,000  people.  The  Bank  is  primarily  engaged  in the
        business of attracting  deposits  from the general  public in its market
        area and investing  such  deposits in mortgage  loans secured by one- to
        four-family residential real estate. The Bank's primary area for lending
        and other financial services consists of Hamilton County,  Iowa, and the
        surrounding  contiguous counties.  Security Title and Abstract,  Inc. is
        engaged in the business of providing abstracting and title services. The
        primary area for these services  consists of Hamilton  County,  Iowa and
        the surrounding contiguous counties.

        Webster  City Federal  Bancorp was formed on July 1, 1999  pursuant to a
        plan  of  reorganization  adopted  by the  Bank  and  its  stockholders.
        Pursuant  to the  reorganization,  each  share of Webster  City  Federal
        Savings  Bank  stock  held by  existing  stockholders  of the  Bank  was
        exchanged  for a share of common stock of Webster City Federal  Bancorp.
        The  reorganization  had no financial  statement impact and is reflected
        for all prior  periods  presented.  Approximately  60% of the  Company's
        common stock is owned by WCF Financial  M.H.C., a mutual holding company
        (the Holding  Company).  The remaining 40% of the Company's common stock
        is owned by the  general  public  including  the Bank's  Employee  Stock
        Ownership Plan.

        Principles of Consolidation

        The consolidated  financial  statements  include the accounts of Webster
        City Federal Bancorp,  Security Title and Abstract,  Inc.,  Webster City
        Federal  Savings  Bank,  and the Bank's  wholly  owned  subsidiary,  WCF
        Service Corporation,  which is engaged in the sales of mortgage life and
        credit  life  insurance  to the  Bank's  loan  customers.  All  material
        intercompany accounts and transactions have been eliminated.

        The consolidated  financial  statements have been prepared in accordance
        with accounting  principles  generally  accepted in the United States of
        America. In preparing such financial statements,  management is required
        to make estimates and  assumptions  that affect the reported  amounts of
        assets  and  liabilities   and  disclosure  of  contingent   assets  and
        liabilities  as of the  date  of the  balance  sheet  and  revenues  and
        expenses for the period.  Actual results could differ significantly from
        those estimates. Material estimates that are particularly susceptible to
        significant change relate to the determination of the allowance for loan
        losses.

        Earnings Per Share Computations

        The Company applies Statement of Financial  Accounting  Standards (SFAS)
        No. 128,  Earnings  per Share for basic and diluted  earnings  per share
        calculation and reporting standards.

        Earnings  per  share-basic  for 2000 is  computed  using  the  1,939,415
        weighted-average  common shares outstanding for the year, net of 182,801
        weighted-average  treasury  shares and divided  into the net earnings of
        $1,300,630.  Earnings per  share-diluted  for 2000 is computed using the
        1,939,415  weighted-average  common shares  outstanding and divided into
        the net  earnings  of  $1,300,630.  The effect of stock  options was not
        dilutive in 2000.


                                       18                            (Continued)
<PAGE>

                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

        Earnings  per  share-basic  for 1999 is  computed  using  the  2,080,517
        weighted-average common shares outstanding for the year, which is net of
        6,770 weighted-average  unearned ESOP shares and 30,866 weighted-average
        treasury  shares  and  divided  into  the net  earnings  of  $1,249,681.
        Earnings  per  share-diluted  for 1999 is computed  using the  2,080,517
        weighted-average  common  shares  outstanding  and adding  the  dilutive
        effect of stock options  totaling  6,459 shares and divided into the net
        earnings of $1,249,681.

        Earnings  per  share-basic  for 1998 is  computed  using  the  2,092,818
        weighted-average common shares outstanding for the year, which is net of
        20,127  weighted-average  unearned  ESOP shares and divided into the net
        earnings of $1,315,728.  Earnings per share-diluted for 1998 is computed
        using the  2,092,818  weighted-average  common  shares  outstanding  and
        adding the dilutive  effect of stock options  totaling 17,828 shares and
        divided into the net earnings of $1,315,728.

        Cash and Cash Equivalents

        For the purpose of reporting cash flows,  the Company  includes cash and
        due  from  other  financial  institutions  and  time  deposits  in other
        financial  institutions with original maturities of three months or less
        in cash and cash  equivalents.  Included as cash equivalents at December
        31, 2000 and 1999, were  interest-bearing  deposits totaling  $5,815,975
        and $4,239,112, respectively.

        Securities

        Investment  securities  are classified  based on the Company's  intended
        holding  period.  Securities  which  the  Company  has the  ability  and
        positive intent to hold to maturity are classified as  held-to-maturity.
        Securities  held  principally  for the  purpose of  near-term  sales are
        classified as trading. Securities which may be sold prior to maturity to
        meet liquidity  needs,  to respond to market  changes,  or to adjust the
        Company's asset-liability position are classified as available-for-sale.
        At December 31, 2000,  the Bank had no trading  securities.  At December
        31,   1999,   the  Bank  had  no  trading   securities   or   securities
        available-for-sale.

        Securities   held-to-maturity   are  carried  at  cost,   adjusted   for
        amortization of premiums and accretion of discounts.  Trading securities
        are carried at fair  value,  with gains and losses,  both  realized  and
        unrealized,  included in operations.  Securities  available-for-sale are
        carried at fair value,  with the aggregate  unrealized  gains or losses,
        net of the  effect  of taxes  on  income,  reported  as a  component  of
        stockholders'   equity.  Other  than  temporary  unrealized  losses  are
        recorded in the consolidated statement of operations.

        Mortgage-backed   securities  are  classified  as   held-to-maturity  at
        amortized cost.  Premiums and discounts are amortized and accreted using
        the interest method over the remaining  period to contractual  maturity,
        adjusted for prepayments.  Actual prepayment  experience is periodically
        reviewed,  and the amortization and accretion are adjusted  accordingly.
        These investments are not carried as available-for-sale,  as the Company
        has the ability and it is  management's  positive intent to hold them to
        maturity.

        Net realized  gains or losses are shown in the  statements of operations
        using the specific identification method.


                                       19                            (Continued)

<PAGE>

                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        Allowance for Losses on Loans

        The allowance for losses on loans is maintained at an amount  considered
        adequate to provide for such losses.  The  allowance for losses on loans
        is based on management's  periodic  evaluation of the loan portfolio and
        reflects an amount that, in management's  opinion, is adequate to absorb
        probable losses in the existing portfolio.  In evaluating the portfolio,
        management takes into consideration numerous factors,  including current
        economic conditions,  prior loan loss experience, the composition of the
        loan portfolio, and management's estimate of anticipated credit losses.

        Accrued interest  receivable on loans which become more than ninety days
        in arrears is charged to an allowance  which is  established by a charge
        to interest income.  Interest income is subsequently  recognized only to
        the extent cash payments are received until,  in management's  judgment,
        the borrower's  ability to make periodic interest and principal payments
        is back to normal, in which case the loan is returned to accrual status.

        Under the Company's credit  policies,  all loans with interest more than
        ninety days in arrears and  restructured  loans are considered  impaired
        loans.  Loan  impairment  is  measured  based  on the  present  value of
        expected future cash flows,  discounted at the loan's effective interest
        rate except, where more practical, at the observable market price of the
        loan or the fair  value  of the  collateral,  if the loan is  collateral
        dependent.

        Loan Origination Fees and Related Costs

        Mortgage  loan  origination  fees and certain  direct  loan  origination
        costs, if material,  are deferred,  and the net fee or cost is amortized
        using the interest  method over the estimated  life of the loan.  Direct
        loan origination  costs for other loans are expensed,  as such costs are
        not material in amount.

        Premiums and discounts in connection  with mortgage loans  purchased are
        amortized over the term of the loans using the interest method.

        Financial Instruments With Off-balance Sheet Risk

        Commitments  to extend  credit are  agreements  to lend to a customer as
        long as there  is no  violation  of any  conditions  established  in the
        contract.  Commitments  generally have fixed  expiration  dates or other
        termination  clauses and may require payment of a fee. Since many of the
        commitments  are expected to expire  without being drawn upon, the total
        commitment amounts do not necessarily represent future cash requirements
        (see note 3). The Company evaluates each customer's  creditworthiness on
        a  case-by-case  basis.  The amount of  collateral  obtained,  if deemed
        necessary  by  the  Company,  upon  extension  of  credit  is  based  on
        management's credit evaluation of the counterparty.

        Office Property and Equipment

        Office property and equipment are recorded at cost, and  depreciation is
        provided primarily by the straight-line method over the estimated useful
        lives of the related assets, which range from ten to fifty years for the
        office  building  and  improvements  and five to  twenty-five  years for
        furniture, fixtures, and equipment.


                                       20                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        Maintenance  and repairs are charged against  income.  Expenditures  for
        improvements are capitalized and subsequently depreciated.  The cost and
        accumulated  depreciation of assets retired or otherwise disposed of are
        eliminated from the asset and accumulated depreciation accounts. Related
        profit or loss from such transactions is credited or charged to income.

        Taxes on Income

        The Company and its subsidiaries  file  consolidated  federal income tax
        returns.  Federal taxes on income are allocated  based on taxable income
        or loss included in the consolidated return. For state tax purposes, the
        Bank files a franchise  tax return and the Company,  Security  Title and
        Abstract,   Inc.,  and  WCF  Service  Corporation  file  a  consolidated
        corporate income tax return.

        The Company  utilizes the asset and liability method for taxes on income
        and deferred tax assets and  liabilities  are  recognized for the future
        tax  consequences  attributable  to  differences  between the  financial
        statement  carrying amounts of existing assets and liabilities and their
        respective tax bases.  Deferred tax assets and  liabilities are measured
        using enacted tax rates expected to apply to taxable income in the years
        in which those  temporary  differences  are  expected to be recovered or
        settled.  The effect on deferred tax assets and  liabilities of a change
        in tax rates is  recognized  in income in the period that  includes  the
        enactment date.

        Stock Option Plan

        The Company  provides pro forma net earnings and pro forma  earnings per
        share  disclosures  for employee  stock  option  grants made in 1996 and
        subsequent years as if the fair-value-based  method, which recognizes as
        expense over the vesting period the fair value of stock-based  awards at
        the date of grant, had been applied.

        Fair Value of Financial Instruments

        The  Company   discloses   estimated   fair  values  for  its  financial
        instruments.  Fair value  estimates,  methods,  and  assumptions are set
        forth below:

        o   Cash  and cash  equivalents  and time  deposits  in other  financial
            institutions - The carrying amount is a reasonable  estimate of fair
            value.

        o   Securities  available for sale and held to maturity - The fair value
            of investment  securities is estimated based on bid prices published
            in financial  newspapers,  bid quotations  received from  securities
            dealers,  or quoted market prices of similar  instruments,  adjusted
            for differences  between the quoted  instruments and the instruments
            being valued.

        o   Mortgage-backed   and  related   securities  -  The  fair  value  of
            mortgage-backed  and related  securities  is estimated  based on bid
            prices published in financial newspapers and bid quotations received
            from securities dealers.


                                       21                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

        o   Loans-  Fair  values  are  estimated  for  portfolios  of loans with
            similar  financial  characteristics.  Loans are  segregated by type,
            such as real estate,  consumer,  and  commercial.  The fair value of
            loans is calculated by discounting  scheduled cash flows through the
            estimated  maturity  using  estimated  market  discount  rates  that
            reflect the credit and interest rate risk inherent in the loan.  The
            estimate  of  maturity   is  based  on  the   Company's   historical
            experience, with repayments for each loan classification,  modified,
            as  required,  by an estimate of the effect of current  economic and
            lending conditions.  The effect of nonperforming loans is considered
            in assessing the credit risk inherent in the fair value estimate.

        o   FHLB stock - The value of FHLB stock is  equivalent  to its carrying
            value because the stock is redeemable at par value.

        o   Accrued  interest  receivable  and  accrued  interest  payable - The
            recorded amount of accrued interest  receivable and accrued interest
            payable approximates fair value as a result of the short-term nature
            of the instruments.

        o   Deposits - The fair value of deposits with no stated maturity,  such
            as passbook;  money market;  noninterest  bearing checking,  and NOW
            accounts,  is equal to the amount payable on demand.  The fair value
            of  certificates  of  deposit  is based on the  discounted  value of
            contractual  cash flows.  The discount  rate is estimated  using the
            rates   currently   offered  for   deposits  of  similar   remaining
            maturities. The fair value estimates do not include the benefit that
            results   from  the  low-cost   funding   provided  by  the  deposit
            liabilities compared to the cost of borrowing funds in the market.

        o   FHLB  advances - The fair value of the FHLB advances is based on the
            discounted  value of the cash flows.  The discount rate is estimated
            using the rates currently offered for fixed rate advances of similar
            remaining maturities.

        o   Off-balance  sheet assets  (liabilities) - The unrealized  gains and
            losses of  commitments  to extend  credit  are  estimated  using the
            difference  between  current  levels of interest rates and committed
            rates.  The  unrealized  gains and  losses of  letters of credit are
            based on fees currently charged for similar agreements.

        o   Limitations - Fair value  estimates are made at a specific  point in
            time, based on relevant market information and information about the
            financial  instrument.  Because no market  exists for a  significant
            portion of the Company's financial instruments, fair value estimates
            are based on judgments  regarding  future expected loss  experience,
            current  economic   conditions,   risk  characteristics  of  various
            financial  instruments,  and  other  factors.  These  estimates  are
            subjective  in nature  and  involve  uncertainties  and  matters  of
            significant  judgment  and,  therefore,  cannot be  determined  with
            precision.  Changes in assumptions could significantly  affect these
            estimates.

                                       22                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        Effect of New Financial Accounting Standards

        Statement of Financial  Accounting  Standards (SFAS) 133, Accounting for
        Derivative  Instruments  and  Hedging  Activities,  and  SFAS  No.  138,
        Accounting  for  Certain  Derivative  Instruments  and  Certain  Hedging
        Activities - an Amendment to FASB Statement No. 133, were adopted by the
        Company for the quarter  beginning  October 1, 2000. The adoption of the
        standards did not have a material  effect on the Company's  consolidated
        financial statements.

        Statement of Financial  Accounting  Standards (SFAS) 140, Accounting for
        Transfers  and  Servicing  of  Financial  Asset and  Extinguishments  of
        Liabilities,  is  effective  for  transfers  and  servicing of financial
        assets  and   extinguishments  of  liabilities  after  March  31,  2001.
        Management  does not  expect the  adoption  of this  standard  to have a
        material effect on the Company's consolidated financial statements.

(2)     Securities Available-for-sale and Held-to-maturity

        On November 27, 2000,  in  connection  with the adoption of SFAS 133 and
        SFAS 138, the Bank transferred  certain securities in its portfolio from
        held-to-maturity  to   available-for-sale   in  order  to  provide  more
        flexibility in the management of the portfolio.  Securities  transferred
        had an  amortized  cost of  $14,548,897  with net  unrealized  losses of
        $259,637 at the date of the transfer.

        Securities available for sale at December 31, 2000, were as follows:

<TABLE>
<CAPTION>
                                                    Gross           Gross          Estimated
                                 Amortized       unrealized       unrealized          fair
        Description                cost             gains           losses           value
----------------------------   --------------   --------------  ---------------  ---------------
<S>                          <C>                        <C>             <C>          <C>
U.S. agency securities       $    11,550,000            3,700           35,780       11,517,920
                               --------------   --------------  ---------------  ---------------

                             $    11,550,000            3,700           35,780       11,517,920
                               ==============   ==============  ===============  ===============


</TABLE>



                                       23                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        Securities  held-to-maturity  at  December  31,  2000 and 1999,  were as
follows:
<TABLE>
<CAPTION>
                                                        Gross         Gross      Estimated
                                      Amortized      unrealized     unrealized      fair
         Description                      cost           gains        losses        value
         -----------                      ----           -----        ------        -----
 <S>                                   <C>               <C>           <C>        <C>
2000:
    Municipal bonds                   $  368,730            --         4,412       364,318
    Mortgage-backed securities:
      Federal National Mortgage
        Association (FNMA)             1,639,930         4,199        12,058     1,632,071
      Government National Mortgage
        Association (GNMA)             2,917,177         8,780        35,827     2,890,130
      Federal Home Loan Mortgage
        Corporation (FHLMC)            1,467,903        56,328        13,172     1,511,059
                                      ----------    ----------    ----------    ----------

                                      $6,393,740        69,307        65,469     6,397,578
                                      ==========    ==========    ==========    ==========

<CAPTION>
                                                        Gross         Gross      Estimated
                                      Amortized      unrealized     unrealized      fair
         Description                      cost           gains        losses        value
         -----------                      ----           -----        ------        -----
 <S>                                   <C>               <C>           <C>        <C>
1999:
    U.S. agency securities            $14,547,903          1,202        535,275     14,013,830
    Municipal bonds                       368,163             --         15,800        352,363
    Mortgage-backed securities:
      Federal National Mortgage
        Association (FNMA)              2,244,933          3,720         48,999      2,199,654
      Government National Mortgage
        Association (GNMA)              3,552,250         12,044         50,710      3,513,584
      Federal Home Loan Mortgage
        Corporation (FHLMC)             2,008,346         85,043         43,376      2,050,013
                                      -----------    -----------    -----------    -----------

                                      $22,721,595        102,009        694,160     22,129,444
                                      ===========    ===========    ===========    ===========

</TABLE>


        The   amortized   cost  and   estimated   fair   value   of   securities
        held-to-maturity and securities  available-for-sale at December 31, 2000
        are shown below by contractual maturity. Expected maturities will differ
        from contractual maturities because borrowers may have the right to call
        or prepay obligations with or without call or prepayment penalties.


                                       24                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                       Held to Maturity                 Available for Sale
                                                   ---------------------------     --------------------------
                                                   Amortized        Estimated        Amortized      Estimated
                                                      cost          fair value        cost          fair value
                                                   ----------       ---------      ----------      ----------
<S>                                                <C>              <C>            <C>                    <C>
Due in one year or less                            $       --              --              --              --
Due after one year through five years                      --              --      10,500,000      10,475,270
Due after five years, but less than ten years         368,729         364,317       1,050,000       1,042,650
Mortgage-backed and related securities              6,025,011       6,033,261              --              --
                                                   ----------       ---------      ----------      ----------
                                                   $6,393,740       6,397,578      11,550,000      11,517,920
                                                   ==========       =========      ==========      ==========
</TABLE>
        There  were no sales of  securities  held-to-maturity  during  the years
        ended  December  31, 2000,  1999,  and 1998.  Proceeds  from the sale of
        securities  available  for  sale  during  2000  totaled  $2,996,700  and
        resulted in gross realized gains of $18,500 and gross realized losses of
        $0.

        At  December  31,  2000  and  1999,  accrued  interest   receivable  for
        securities  available-for-sale and securities  held-to-maturity  totaled
        $257,900 and $391,205, respectively.

  (3)   Loans Receivable

        At  December  31,  2000 and  1999,  loans  receivable  consisted  of the
        following:

<TABLE>
<CAPTION>
                                               2000             1999
                                          ------------      ------------
<S>                                       <C>               <C>
Real estate loans:
    One- to four-family residential       $ 55,113,819        50,419,973
    Multifamily residential and other        5,317,000         5,248,000
    Home equity                              4,750,442         4,141,657
                                          ------------      ------------

                                            65,181,261        59,809,630
                                          ------------      ------------
Consumer and other loans:
    Automobile                               2,418,000         1,682,000
    Home improvement                         1,485,474         1,083,439
    Loans on savings deposits                  525,893           248,158
    Other                                      769,966           587,492
                                          ------------      ------------

                                             5,199,333         3,601,089
                                          ------------      ------------

Real estate sold on contract                    66,303           100,235
                                          ------------      ------------

             Total loans receivable         70,446,897        63,510,954

Premium on loans purchased                       3,409             5,865
Unearned discount on loans purchased           (14,410)          (19,917)
Loans in process                              (928,199)         (922,170)
Allowance for losses on loans                 (403,484)         (382,402)
                                          ------------      ------------

                                          $ 69,104,213        62,192,330
                                          ============      ============


</TABLE>

                                       25                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        Accrued  interest  receivable  on  loans  receivable  was  $412,479  and
        $354,009 at December 31, 2000 and 1999, respectively.

        The Company originates  residential and commercial real estate loans and
        other consumer loans,  primarily in its Hamilton  County,  Iowa,  market
        area and  adjacent  counties.  In  addition,  the Company has  purchased
        residential loans,  primarily in Iowa, Texas, and Colorado.  At December
        31, 2000, approximately $4.9 million of the Company's loans were secured
        by  properties  in  Texas  and  Colorado.  Although  the  Company  has a
        diversified  loan  portfolio,  a substantial  portion of its  borrowers'
        ability to repay their loans is dependent  upon  economic  conditions in
        the Company's market area.

        Loans  with  interest  more than  ninety  days in  arrears,  defined  as
        impaired and carried on nonaccrual  status,  amounted to $194,552 and $0
        at December  31, 2000 and 1999,  respectively.  The  allowance  for loan
        losses  related  to  these  loans  were  $0.  The  average  balances  of
        nonaccrual  loans for the years  ended  December  31, 2000 and 1999 were
        $39,480 and $23,084, respectively. For the years ended December 31, 2000
        and 1999,  interest  income,  which would have been  recorded  under the
        original  terms of the  loans,  was  approximately  $3,054  and  $1,628,
        respectively,  with $1,461 and $1,628, respectively,  of interest income
        actually recorded.

        At December 31, 2000,  the Company had  commitments  to buy or fund four
        fixed rate loans  totaling  $198,700.  At December 31, 1999, the Company
        had  commitments  to  buy  or  fund  loans  of  approximately  $405,000,
        including three fixed rate commitments totaling $232,350.  There were no
        commitments to sell loans.

        Loan customers of the Company  include  certain  executive  officers and
        directors and their related interests and associates.  All loans to this
        group were made in the ordinary  course of business at prevailing  terms
        and  conditions.  Such loans at December  31, 2000 and 1999  amounted to
        $878,921 and $714,958, respectively.  During the year ended December 31,
        2000, $178,600 of new loans were made and repayments totaled $14,637.

  (4)   Allowance for Losses on Loans

        A summary of the allowance for losses on loans follows:

<TABLE>
<CAPTION>
                                                     December 31
                                        ---------------------------------------
                                           2000           1999           1998
                                        ---------      ---------      ---------
<S>                                     <C>              <C>            <C>
Balance at beginning of year            $ 382,402        385,188        385,149

Provision for losses                           --             --             --
Charge-offs                                (1,968)        (9,264)          (725)
Recoveries                                 23,050          6,478            764
                                        ---------      ---------      ---------

Balance at end of year                  $ 403,484        382,402        385,188
                                        =========      =========      =========
</TABLE>




                                       26                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


  (5)   Office Property and Equipment

        At December 31, 2000 and 1999, the cost and accumulated  depreciation of
        office property and equipment were as follows:

<TABLE>
<CAPTION>

                                                       2000              1999
                                                    ----------        ----------
<S>                                                 <C>                  <C>
Land                                                $  125,746           125,746
Office building and improvements                       815,740           741,403
Furniture, fixtures, and equipment                     429,077           409,376
                                                    ----------        ----------

                                                     1,370,563         1,276,525

Less accumulated depreciation                          875,759           791,440
                                                    ----------        ----------

                                                    $  494,804           485,085
                                                    ==========        ==========
</TABLE>

  (6)   Deposits

        At December 31, 2000 and 1999, deposits are summarized as follows:

<TABLE>
<CAPTION>
<PAGE>
                                                     2000                1999
                                                 -----------         -----------
<S>                                              <C>                   <C>
Passbook                                         $ 4,318,947           4,730,437
Money market plus                                  6,022,667           6,035,983
Noninterest-bearing checking                       1,284,867           1,882,406
NOW                                                7,454,103           5,824,154
Certificates of deposit                           46,065,225          49,445,222
                                                 -----------         -----------

                                                 $65,145,809          67,918,202
                                                 ===========         ===========
</TABLE>
        The  aggregate   amount  of  certificates  of  deposit  with  a  minimum
        denomination of $100,000 was approximately  $5,801,396 and $7,116,565 at
        December 31, 2000 and 1999, respectively.


                                       27                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        At December  31, 2000,  the  scheduled  maturities  of  certificates  of
deposit were as follows:

                              2001               $ 26,865,737
                              2002                 14,635,139
                              2003                  2,850,566
                              2004                    815,563
                      2005 and thereafter             898,220
                                                 ------------

                                                 $ 46,065,225
                                                 ============


        Interests  expense on deposits  for the years ended  December  31, 2000,
1999, and 1998 is summarized as follows:

<TABLE>
<CAPTION>
                                          2000           1999           1998
                                      ----------      ----------      ----------
<S>                                   <C>                <C>             <C>
Passbook                              $  111,190         105,367         123,280
Money market plus and NOW                355,930         303,713         292,420
Certificates of deposit                2,550,993       2,515,094       2,854,214
                                      ----------      ----------      ----------

                                      $3,018,113       2,924,174       3,269,914
                                      ==========      ==========      ==========
</TABLE>
        Public  funds  amounted to  approximately  $799,000  and  $3,427,000  at
December 31, 2000 and 1999, respectively.

        At December  31,  2000 and 1999,  accrued  interest  payable on deposits
        totaled $50,855 and $122,212, respectively.

  (7)   Advances from Federal Home Loan Bank (FHLB)

        The  following  is a summary of advances  from FHLB at December 31, 2000
and 1999:

         FHLB of Des Moines
     Maturity in fiscal year        Interest
       ending December 31             Rate             2000            1999
                                    -------       ------------     ----------

              2001                     6.98%      $  2,000,000             --
              2009                     5.55          3,200,000      3,200,000
              2010                     5.64          3,000,000             --
                                                  ------------      ---------

                                                  $  8,200,000      3,200,000
                                                  ============      =========


                                       28                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        Advances  from the FHLB are secured by stock in the FHLB.  In  addition,
        the Bank has agreed to maintain unencumbered  additional security in the
        form of certain residential mortgage loans aggregating no less than 125%
        of outstanding advances.  The advances require monthly interest payments
        and interest is due at a maturity.

  (8)   Taxes on Income

        Taxes on income were comprised as follows:

<TABLE>
<CAPTION>

                                2000                                        1999
               Federal          State        Total         Federal         State          Total
             ---------      ---------      ---------      ---------      ---------      ---------
<S>          <C>              <C>            <C>            <C>            <C>            <C>
Current      $ 710,000        110,000        820,000        691,000        108,000        799,000
Deferred       (25,000)        (4,000)       (29,000)       (16,000)        (3,000)       (19,000)
             ---------      ---------      ---------      ---------      ---------      ---------

             $ 685,000        106,000        791,000        675,000        105,000        780,000
             =========      =========      =========      =========      =========      =========

<CAPTION>

                                                      1998
                                -----------------------------------------------
                                  Federal            State              Total
                                ---------          ---------          ---------

<S>                             <C>                  <C>                <C>
Current                         $ 737,000            114,000            851,000
Deferred                          (42,000)            (6,000)           (48,000)
                                ---------          ---------          ---------

                                $ 695,000            108,000            803,000
                                =========          =========          =========

</TABLE>

        Taxes on income differ from the amounts computed by applying the federal
        income  tax  rate of 34% to  earnings  before  taxes on  income  for the
        following reasons, expressed in percentages:

<TABLE>
<CAPTION>

                                                                   December 31
                                                          ----------------------------
                                                           2000       1999       1998
                                                          -------    -------    ------
<S>                                                        <C>       <C>         <C>
Federal income tax rate                                    34.0%     34.0        34.0
Items affecting federal income tax rate:
    State taxes on income, net of federal benefit           3.3        3.3         3.3
    Other                                                   0.5        1.1         0.6
                                                          -----       ----        ----

                                                           37.8%      38.4        37.9
                                                           ====       ====        ====
</TABLE>

                                       29                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

        The tax effects of temporary  differences  that give rise to significant
        portions of deferred tax assets and deferred tax liabilities at December
        31, 2000 and 1999 are presented below:

<TABLE>
<CAPTION>
                                                        2000            1999
                                                      ---------       ---------
<S>                                                   <C>               <C>
Deferred tax assets:
    Deferred directors' fees                          $ 247,000         215,000
    General bad debt allowance                          140,000         140,000
    Securities available-for-sale                        18,000              --
                                                      ---------       ---------

             Gross deferred tax assets                  405,000         355,000

    Less valuation allowance                                 --              --
                                                      ---------       ---------

             Net deferred tax assets                    405,000         355,000
                                                      ---------       ---------

Deferred tax liabilities:
    Deferred loan fees                                 (116,000)       (108,000)
    FHLB stock dividends                                (74,000)        (74,000)
    Tax bad debt reserve                                 (4,000)         (7,000)
    Accrual to cash conversion for
      interest income on certain loans                   (8,000)         (9,000)
    Other                                                    --          (1,000)
                                                      ---------       ---------

             Gross deferred tax liabilities            (202,000)       (199,000)
                                                      ---------       ---------

             Net deferred tax asset                   $ 203,000         156,000
                                                      =========       =========

</TABLE>


  (9)   Benefit Plans

        Retirement Plan

        The Bank is a participant in the Financial Institutions  Retirement Fund
        (FIRF),  and substantially all of its officers and employees are covered
        by the retirement plan. FIRF does not segregate the assets, liabilities,
        or costs by participating employer.  According to FIRF's administrators,
        as of June 30, 1999,  the date of the latest  actuarial  valuation,  the
        book and market  values of the fund assets  exceeded the value of vested
        benefits in the aggregate.  In accordance with FIRF's instructions,  the
        Bank did not make any contributions to the plan in 2000, 1999, or 1998.

        ESOP

        All employees  meeting the age and service  requirements are eligible to
        participate in the ESOP established in August 1994.  Contributions  made
        by the Company to the ESOP are  allocated to  participants  by a formula
        based on  compensation.  Participant  benefits  become 100% vested after
        five years of service.  ESOP expense was $0, $161,894,  and $102,304 for
        the years ended December 31, 2000, 1999, and 1998, respectively.


                                       30                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

        The  Company  paid the balance of the ESOP loan  during  1999.  Interest
        expense on the ESOP's  borrowing for the years ended  December 31, 2000,
        1999, and 1998 was $0, $5,086,  and $14,182,  respectively.  At December
        31,  1998,  20,127  shares were  unearned.  On January 1, 1999 and 1998,
        6,588 and 6,186 shares, respectively,  were released for allocation. The
        remaining shares were released from allocation when the loan was paid on
        June 30, 1999.

        Deferred Compensation

        The Company has deferred compensation agreements with certain directors,
        and at December 31, 2000 and 1999, had accrued deferred  compensation of
        $661,994 and  $575,448,  respectively.  Directors'  fees  deferred  were
        $29,700, $29,400, and $27,750 for 2000, 1999, and 1998, respectively.

        Stock Option Plan

        In 1996, the Company  adopted a stock option plan (the Plan) pursuant to
        which the  Company's  board of  directors  may grant  stock  options  to
        officers,  key employees,  and nonemployee directors of the Company. The
        Plan  authorizes  grants of options to purchase  up to 95,000  shares of
        authorized but unissued common stock and treasury  stock.  Stock options
        for 80,750 shares were granted upon adoption of the Plan.  Stock options
        are  granted  with an exercise  price  equal to the stock's  fair market
        value at the date of grant.  All stock options have  ten-year  terms and
        vest and become fully  exercisable  in three equal annual  installments,
        commencing one year from the date of grant.

        At December  31, 2000 and 1999,  there were  14,250  additional  options
        available for grant under the Plan. The per share  weighted-average fair
        value of stock  options  granted  during  1996 was  $2.00 on the date of
        grant using the Black Scholes  option-pricing  model, with the following
        weighted-average assumptions: expected dividend yield of 6.27%, expected
        volatility of 22%,  risk-free  interest  rate of 6.37%,  and an expected
        life of six years.

        The  Company  applies  Accounting  Principles  Board  Opinion  No. 25 in
        accounting for its Plan, and, accordingly, no compensation cost has been
        recognized  for its stock options in the financial  statements.  Had the
        Company  determined  compensation  cost  based on the fair  value at the
        grant date for its stock  options  under  SFAS 123,  the  Company's  net
        earnings and earnings per share would have been reduced to the pro forma
        amounts indicated below:

<TABLE>
<CAPTION>

                                                          2000            1999           1998
                                                    --------------      ---------      ---------
<S>                                                 <C>                 <C>            <C>
Net earnings                         As reported    $    1,300,630      1,249,681      1,315,728
                                     Pro forma           1,278,699      1,221,679      1,282,002
                                                    ==============      =========      =========

Earnings per share - basic           As reported    $         0.67           0.60           0.63
                                     Pro forma                0.66           0.59           0.61
                                                    ==============      =========      =========

Earnings per share - diluted         As reported    $         0.67           0.60           0.62
                                     Pro forma                0.66           0.58           0.60
                                                    ==============      =========      =========
</TABLE>


                                       31                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        Pro forma net earnings  reflects only options  granted in 1996. The full
        impact of calculating compensation cost for stock options under SFAS 123
        is not  reflected in the pro forma net income  amounts  presented  above
        because compensation cost is reflected over the options' vesting period.
        There were no options granted in 2000, 1999, or 1998.

        Stock option activity during the periods indicated was as follows:

<TABLE>
<CAPTION>
                                         2000                        1999                          1998
                                -----------------------    ------------------------     --------------------------
                                 Number        Exercise       Number       Exercise        Number        Exercise
                                of shares      price        of shares       price        of shares        price
                                ---------      -----        ---------       -----        ---------        -----
<S>                               <C>        <C>             <C>         <C>             <C>          <C>
Balance at beginning of year      50,611     $   12.75       56,837      $   12.75        66,167      $   12.75
Granted                               --         --              --          --               --          --
Exercised                             --         --          (6,226)         12.75        (9,330)         12.75
Expired                               --         --              --          --               --          --
                                ---------      -----        ---------       -----        ---------        -----

Balance at end of year            50,611         12.75       50,611          12.75        56,837          12.75
                                 =======     =========       =======      ========        =======      ========
</TABLE>



        At December 31, 2000, the exercise price and weighted-average  remaining
        contractual  life of  outstanding  options  was $12.75  and 5.33  years,
        respectively.

(10)    Stockholders' Equity

        Stock Holding Company Reorganization

        On July 1, 1999, the board of directors of Webster City Federal  Savings
        Bank  adopted  a plan of  reorganization  to  create a  two-tier  mutual
        holding  company  structure  with the  establishment  of a Webster  City
        Federal Bancorp, a stock holding company parent of the Bank. Pursuant to
        the  reorganization,  each share of Webster  City  Federal  Savings Bank
        common stock held by the existing stockholders of the Bank was exchanged
        for a share of  common  stock of  Webster  City  Federal  Bancorp.  Upon
        completion of the reorganization, Webster City Federal Bancorp owns 100%
        of the Bank.  Approximately 60% of Webster City Federal Bancorp is owned
        by WCF Financial,  M.H.C.,  a mutual holding company and 40% is owned by
        outside investors, including the Bank's ESOP.

        Common Stock Repurchase

        The Company repurchased 142,400 and 96,738 shares of common stock during
        2000 and 1999,  respectively.  These  shares are recorded at cost in the
        consolidated balance sheet.

        Regulatory Capital Requirements

        The Financial  Institution Reform,  Recovery and Enforcement Act of 1989
        (FIRREA) and the capital regulations of the Office of Thrift Supervision
        (OTS) promulgated  thereunder require  institutions to have a minimum 3%
        core capital ratio;  and a minimum 8% risk-based  capital  ratio.  These
        capital standards set forth in the capital regulations must generally be
        no less  stringent  than the capital  standards  applicable  to national
        banks.  FIRREA also  specifies  the  required  ratio of  housing-related
        assets in order to qualify as a savings  institution.  The  Company  and
        Bank met the regulatory  capital  requirements  at December 31, 2000 and
        1999.
                                       32                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        The  Federal  Deposit  Insurance  Corporation  Improvement  Act of  1991
        (FDICIA)  established  additional  capital  requirements  which  require
        regulatory  action  against  depository   institutions  in  one  of  the
        undercapitalized   categories   defined  in  implementing   regulations.
        Institutions,  such as the Bank, which are defined as well  capitalized,
        must  generally  have a leverage  capital (core) ratio of at least 5%, a
        tier 1 risk-based  capital ratio of at least 6%, and a total  risk-based
        capital  ratio of at least  10%.  FDICIA  also  provides  for  increased
        supervision  by  federal  regulatory   agencies,   increased   reporting
        requirements for insured depository  institutions,  and other changes in
        the legal and regulatory environment for such institutions.  The Company
        and Bank met the regulatory  capital  requirements  at December 31, 2000
        and 1999.

        The Bank's actual and required capital amounts and ratios as of December
        31, 2000 were as follows:

<TABLE>
<CAPTION>
                                                                                                             To be well-
                                                                                  For capital              capitalized under
                                                                                   adequacy                prompt corrective
                                                         Actual                    purposes                action provisions
                                             ---------------------------    ---------------------    ---------------------------
                                                 Amount        Percent        Amount      Percent       Amount         Percent
                                              -----------      -------    -----------     -------     ----------      ----------
<S>                                           <C>               <C>       <C>               <C>       <C>                <C>
Tangible capital:
    Consolidated                              $20,940,000       21.9 %    $ 1,432,000        1.5 %    $       n/a        n/a %
    Webster City Federal Savings Bank          20,397,000       21.4        1,431,000        1.5              n/a        n/a
Tier 1 leverage (core) capital:
    Consolidated                               20,940,000       21.9        3,817,000        4.0        4,772,000        5.0
    Webster City Federal Savings Bank          20,397,000       21.4        3,816,000        4.0        4,770,000        5.0
Risk-based capital:
    Consolidated                               21,208,000       45.9        3,697,000        8.0        4,622,000       10.0
    Webster City Federal Savings Bank          20,665,000       44.9        3,683,000        8.0        4,604,000       10.0
Tier 1 risk-based capital:
    Consolidated                               20,940,000       45.3              n/a        n/a        2,773,000        6.0
    Webster City Federal Savings Bank          20,397,000       44.3              n/a        n/a        2,762,000        6.0
                                              ===========       ====      ===========        ===      ===========
</TABLE>

        At December 31, 2000 and 1999,  the Bank had federal income tax bad debt
        reserves of approximately  $2,430,000,  which constitute  allocations to
        bad debt reserves for federal income tax purposes for which no provision
        for taxes on income had been made. If such  allocations  are charged for
        other than bad debt losses,  taxable  income is created to the extent of
        the charges.

        Dividends and Restrictions Thereon

        The board of  directors of the Company  declared and paid four  20(cent)
        per share dividends in 2000.

        The Holding  Company  waived its right to receive the dividend  declared
        and paid on all four of the 20(cent)  dividends during the year. The OTS
        required  that  the  retained  earnings  of the  Bank be  restricted  by
        $920,000, the amount of the 2000 waived dividends. Cumulative restricted
        retained  earnings  at  December  31,  2000 for  waived  dividends  were
        $5,232,500.

        Prior to the  formation  of the  Company,  the Board of Directors of the
        Bank declared and paid two 20(cent) per share dividends during the first
        and second  quarters  of 1999.  The Board of  Directors  of the  Company
        declared and paid two 20(cent) per share dividends  during the third and
        fourth quarters of 1999.

        The Holding  Company  waived its right to receive the dividend  declared
        and paid on all four of the  20(cent)  dividends  during  1999.  The OTS
        required  that  the  retained  earnings  of the  Bank be  restricted  by
        $920,000, the amount of the 1999 waived dividends. Cumulative restricted
        retained  earnings at  December  31,  1999,  for waived  dividends  were
        $4,312,500.

                                       33                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


        The board of directors of the Bank  declared and paid four  20(cent) per
        share dividends in 1998. The Holding Company waived its right to receive
        the dividend  declared  and paid on all four of the  20(cent)  dividends
        during the year. The OTS required that the retained earnings of the Bank
        be  restricted  by  $920,000,  the amount of the 1998 waived  dividends.
        Cumulative restricted retained earnings at December 31, 1998, for waived
        dividends were $3,392,500.

        Federal  regulations  impose  certain  limitations  on  the  payment  of
        dividends  and  other  capital  distributions  by the  Bank.  Under  the
        regulations, a savings institution, such as the Bank, that will meet the
        fully phased-in capital requirements (as defined by the OTS regulations)
        subsequent to a capital distribution is generally permitted to make such
        capital  distribution without OTS approval so long as they have not been
        notified of the need for more than normal  supervision  by the OTS.  The
        Bank  has  not  been  so  notified  and,  therefore,  may  make  capital
        distributions  during the calendar  year equal to net income plus 50% of
        the  amount by which the  Bank's  capital  exceeds  the fully  phased-in
        capital requirement as measured at the beginning of the calendar year. A
        savings  institution  with total  capital  in excess of current  minimum
        capital   requirements   but  not  in  excess  of  the  fully  phased-in
        requirements  is permitted by the new  regulations to make,  without OTS
        approval,  capital distributions of between 25 and 75% of its net income
        for the previous four  quarters,  less  dividends  already paid for such
        period. A savings institution that fails to meet current minimum capital
        requirements is prohibited from making any capital distributions without
        prior approval from the OTS.


                                       34                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


(11)    Fair Value of Financial Instruments

        The  estimated  fair  values  of  Company's  financial  instruments  (as
        described in note 1) at December 31, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>


                                                      2000                              1999
                                      ----------------------------     --------------------------
                                        Carrying           Fair           Carrying           Fair
                                         amount            value           amount           value
                                      -----------       ---------       ---------       ---------
<S>                                   <C>               <C>             <C>             <C>
Financial assets:
    Cash and cash equivalents         $ 6,250,706       6,250,706       4,986,099       4,986,099
    Time deposits in other
      financial institutions                   --              --       2,585,000       2,585,000
    Securities available for sale      11,517,920      11,517,920              --              --
    Securities held-to-maturity         6,393,740       6,397,578      22,721,595      22,129,444
    Loans receivable, net              69,104,213      65,345,825      62,192,330      57,722,978
    FHLB stock                            613,200         613,200         613,200         613,200
    Accrued interest receivable           670,379         670,379         761,267         761,267

Financial liabilities:
    Deposits                           65,145,809      65,873,276      67,918,202      68,094,360
    FHLB Advances                       8,200,000       7,848,417       3,200,000       2,848,656
    Accrued interest payable               50,855          50,855         122,212         122,212
                                      ===========     ===========     ===========     ===========


<CAPTION>


                                           Notional        Unrealized        Notional        Unrealized
                                            Amount         gain (loss)        Amount        gain (loss)
                                         --------------   --------------   --------------  ---------------
<S>                                    <C>               <C>              <C>             <C>
Off  balance sheet instrument -
    Commitments to extend credit       $       198,700               --          405,000               --
                                       ===============   ==============   ==============  ===============
</TABLE>
                                       35                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


(12)    Parent Company Only Financial Statements


<TABLE>
<CAPTION>
                                  Condensed Balance Sheets

                                 December 31, 2000 and 1999

                                                                2000             1999
                                                            ------------      ------------
<S>                                                         <C>                    <C>
Cash and cash equivalents                                   $    318,069           837,260
Investment in subsidiaries                                    20,599,391        21,511,045
                                                            ------------      ------------

             Total assets                                   $ 20,917,460        22,348,305
                                                            ============      ============

Liabilities:
    Accrued expenses                                        $     12,556                --
                                                            ------------      ------------

Stockholders' equity:
    Common stock                                                 212,222           212,222
    Additional paid-in capital                                 9,093,681         9,093,681
    Retained earnings                                         15,181,410        14,518,728
    Unrealized loss on securities available-for-sale             (34,833)               --
    Treasury stock                                            (3,547,576)       (1,476,326)
                                                            ------------      ------------

             Total stockholders' equity                       20,904,904        22,348,305
                                                            ------------      ------------

             Total liabilities and stockholders' equity     $ 20,917,460        22,348,305
                                                            ============      ============

<CAPTION>

                             Condensed Statements of Operations

                       For the years ended December 31, 2000 and 1999

                                                                2000                1999
                                                             -----------        -----------
<S>                                                         <C>                  <C>
Dividend income                                             $ 2,500,000          3,082,125
Interest income                                                      59                250
Equity in undistributed earnings of subsidiaries             (1,128,205)        (1,775,022)
Noninterest expenses                                            (96,224)           (57,672)
                                                            -----------        -----------

             Earnings before income tax expense               1,275,630          1,249,681

Income tax benefit                                              (25,000)                --
                                                            -----------        -----------

             Net earnings                                   $ 1,300,630          1,249,681
                                                            ===========        ===========
</TABLE>
                                       36                            (Continued)
<PAGE>
                          WEBSTER CITY FEDERAL Bancorp
                                AND SUBSIDIARies

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998


<TABLE>
<CAPTION>

                             Condensed Statements of Cash Flows

                       For the years ended December 31, 2000 and 1999

                                                                          2000             1999
                                                                      -----------      -----------
<S>                                                                   <C>                <C>
Operating activities:
    Net earnings                                                      $ 1,300,630        1,249,681
    Change in accrued expenses                                             12,556               --
    Equity in undistributed earnings of subsidiaries                    1,128,205        1,775,022
                                                                      -----------      -----------

             Net cash provided by operating activities                  2,441,391        3,024,703
                                                                      -----------      -----------

Investing activities:
    Investment in subsidiary                                             (251,384)              --

Financing activities:
    Repurchase of common stock                                         (2,071,250)      (1,476,326)
    Proceeds on stock options                                                  --           40,349
    Dividends paid                                                       (637,948)        (751,466)
                                                                      -----------      -----------

             Net cash used in financing activities                     (2,709,198)      (2,187,443)
                                                                      -----------      -----------

             Net (decrease) increase in cash and cash equivalents        (519,191)         837,260

Cash and cash equivalents at beginning of period                          837,260               --
                                                                      -----------      -----------

Cash and cash equivalents at end of period                            $   318,069          837,260
                                                                      ===========      ===========

</TABLE>


(13)    Contingencies

        The Company is involved with various claims and legal actions arising in
        the  ordinary  course of  business.  In the opinion of  management,  the
        ultimate  disposition of these matters will not have a material  adverse
        effect on the Bank's consolidated financial statements.

                                       37
<PAGE>

                          WEBSTER CITY FEDERAL BANCORP
                             STOCKHOLDER INFORMATION



ANNUAL MEETING

         The  Annual  Meeting  of  Stockholders  will  be  held  at  1:00  p.m.,
Wednesday,  April 18, 2001, at the main office of the Company located at 820 Des
Moines Street, Webster City, Iowa.



STOCK INFORMATION

         Webster City Federal  Bancorp  common stock is traded over the counter,
on the NASDAQ Small-Cap Market under the symbol "WCFB".

         As of February 28,  2001,  the Company had 221  shareholders  of record
(which does not include approximately 250 shareholders whose stock is in nominee
or "street" name) and 1,886,251 shares of common stock outstanding.

         The price  ranges of the  common  stock and  dividend  payouts  on such
common stock for each quarter were as follows:

<TABLE>
<CAPTION>
                                 2000             1999
                               Dividend         Dividend         Fiscal Year 2000         Fiscal Year 1999
                                 Paid             Paid             Low     High              Low      High
                                 ----             ----             ---     ----              ---      ----


<S>                              <C>              <C>             <C>      <C>              <C>      <C>
         First quarter ........  $.20             $.20            $11.00   $15.13           $14.75   $16.85
         Second quarter .......  $.20             $.20            $11.05   $13.88           $13.75   $15.50
         Third quarter ........  $.20             $.20            $11.13   $12.88           $13.75   $15.75
         Fourth quarter .......  $.20             $.20            $11.25   $14.13           $12.75   $15.63


</TABLE>


STOCKHOLDER AND GENERAL INQUIRIES                    TRANSFER AGENT

Phyllis A. Murphy, President                         Registrar and Transfer Co.
Webster City Federal  Bancorp                        10 Commerce Drive
820 Des Moines Street, P.O. Box 638                  Cranford, New Jersey  07016
Webster City, Iowa 50595-0638                        (800) 368-5948
(515) 832-3071



ANNUAL AND OTHER REPORTS

         The Company is required to file an annual report on Form 10-KSB for its
year ended December 31, 2000 with the Securities and Exchange Commission. Copies
of the Form 10-KSB,  annual  report and the Company's  Quarterly  Reports may be
obtained  without  charge by contacting  Phyllis A. Murphy,  President and Chief
Executive Officer, Webster City Federal Bancorp, 820 Des Moines Street, P.O. Box
638, Webster City, Iowa 50595-0638, (515) 832-3071.

                                       38
<PAGE>

                          WEBSTER CITY FEDERAL BANCORP
                             STOCKHOLDER INFORMATION



COMPANY AND BANK ADDRESS

         820 Des Moines Street                   Telephone:   (515) 832-3071
         Webster City, IA  50595-0638            Fax:         (515) 832-3085
                                                 Web Page:    www.webcityfed.com


DIRECTORS OF THE BOARD

Ellis S. Swon
         Chairman of the Board;
         Retired President and Chief Executive Officer
         of Webster City Federal Savings Bank


Dr. Carroll E. Haynes
         Retired Dentist


Dennis J. Tasler
         President and Chief Executive Officer
         of Tasler Pallet & EPS, Inc.

Donald I. Newman
         Retired  President  and  Chief  Executive Officer
         of Webster City Federal Savings Bank


Phyllis A. Murphy
         President and Chief Executive Officer
         of Webster City Federal Savings Bank

Dr. Leo Moriarty
         Dentist




              WEBSTER CITY FEDERAL SAVINGS BANK EXECUTIVE OFFICERS

Phyllis A. Murphy
         President and Chief Executive Officer

Stephen L. Mourlam
         Executive Vice President and Chief Financial Officer

Kyle R. Swon
         Senior Vice President and Chief Lending Officer

William J. Biggins
         Vice President

Jeffrey C. Kluver
         Vice President

Kathie R. Highland
         Vice President and Secretary


 INDEPENDENT AUDITORS                            CORPORATE COUNSEL

 KPMG LLP                                        Bottorff Law Firm
 2500 Ruan Center                                913 Seneca Street
 Des Moines, Iowa 50309                          Webster City, Iowa 50595


                                 SPECIAL COUNSEL

                      Luse Lehman Gorman Pomerenk & Schick
                        5335 Wisconsin Ave NW, Suite 400
                              Washington, DC 20015


                                       39