SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended December 31, 1999

                                       OR

[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15d) OF THE  SECURITIES
     EXCHANGE  ACT OF 1934 [NO FEE  REQUIRED]  For the  transaction  period from
     ___________________ to ______________________

                           Commission Number: 0-26577

                          WEBSTER CITY FEDERAL BANCORP
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

      United States                                    42-1491186
      -------------                          ------------------------------
(State or Other Jurisdiction of         (I.R.S. Employer Identification Number)
Incorporation or Organization)


820 Des Moines Street, Webster City, Iowa                           50595-0638
-----------------------------------------                           ----------
 (Address of Principal Executive Offices)                           (Zip Code)


                                 (515) 832-3071
                -------------------------------------------------
               (Registrant's Telephone Number including area code)

Securities Registered Pursuant to Section 12(b) of the Act: None
                                                            ----


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

                     Common Stock, par value $.10 per share
                                (Title of Class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant  was  required  to file  reports)  and (2) has been  subject  to such
requirements for the past 90 days.

YES   [X]         NO  [_]


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

         The  Registrant's  revenues for year ended  December 31, 1999 were $6.4
million.

         As of February 28, 2000,  there were issued and  outstanding  2,119,052
shares of the Registrant's Common Stock. The aggregate value of the voting stock
held by non-affiliates of the Registrant, computed by reference to the last sale
price of such stock on the NASDAQ  "Small-Cap"  System as of February  29, 2000,
was $  15,141,438.  (The  exclusion  from such amount of the market value of the
shares owned by any person  shall not be deemed an  admission by the  Registrant
that such person is an affiliate of the Registrant.)

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Sections of Annual Report to  Stockholders  for the year ended December 31,
     1999 (Parts II and III).
2.   Proxy Statement for the 2000 Annual Meeting of Stockholders (Part III).

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

General

         The Registrant,  Webster City Federal Bancorp (the  "Company"),  is the
successor to Webster City Federal  Savings  Bank, a federal  stock  savings bank
(the "Bank"),  which  reorganized into the holding company  structure  effective
July 1, 1999 (the  "Holding  Company  Reorganization").  In the Holding  Company
Reorganization,  each outstanding share of the Bank's common stock was converted
into one share of the  Registrant's  common stock,  and each stockholder of t he
Bank  received  the  same  ownership  interest  in  the  Registrant  immediately
following  the  Holding  Company  Reorganization  as he or she  had in the  Bank
immediately  prior to that  transaction.  Webster City Federal Savings Bank is a
federally  chartered  savings bank that  conducts its  operations  from a single
office in Webster  City,  Iowa,  and is the  successor  to Webster  City Federal
Savings and Loan Association, which was chartered originally in 1934, and became
a federally  chartered  savings and loan  association that same year. The Bank's
deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") under
the Savings Association  Insurance Fund ("SAIF").  The Bank has been a member of
the Federal Home Loan Bank ("FHLB") System since 1934. At December 31, 1999, the
Company had total assets of $94.5 million,  total deposits of $67.9 million, and
stockholders' equity of $22.3 million.

         The Company is primarily engaged in the business of attracting deposits
from  the  general  public  in the  Company's  market  area and  investing  such
deposits,  together  with other sources of funds,  in mortgage  loans secured by
one- to  four-family  residential  real estate for  retention  in the  Company's
portfolio.  At December 31, 1999,  $50.4 million,  or 81.1% of the Company's net
loan portfolio  consisted of one-to four-family  residential  mortgage loans and
$5.2  million,  or 8.4%,  of the  Company's  net  loan  portfolio  consisted  of
multi-family  residential  and other  loans.  The Company also  originates  home
equity  loans,  which  totaled $4.1  million,  or 6.6% of the Company's net loan
portfolio at December 31, 1999.  At December 31, 1999,  consumer and other loans
totaled $3.6 million, or 5.8%, of the Company's net loan portfolio.  The Company
also invests in  mortgage-backed  securities  issued or guaranteed by the United
States Government or agencies thereof,  which totaled $7.8 million,  or 8.3%, of
total assets at December 31, 1999.

         The Company's  principal  executive office is located at 820 Des Moines
Street,  Webster City,  Iowa, and its telephone  number at that address is (515)
832-3071.

Market Area and Competition

         The Company is  headquartered  in Webster  City,  Iowa,  a community of
approximately  8,000 people.  The Company is the largest  independent  financial
institution and the leading  originator of home mortgage loans  headquartered in
Hamilton  County.  Although the Company  conducts its  operations  from a single
office,  its market area for lending and other  financial  services  consists of
Hamilton  and  surrounding  contiguous  counties.  Although  the  economy of the
Company's  market area is heavily  influenced  by  agriculture,  it has a fairly
diverse  industrial  base.  The major  employers  in the  Company's  market  are
Frigidaire, a home appliance manufacturer,  Van Diest Supply Co., a chemical and
fertilizer concern, Webster City Custom Meats, a meat processor, Tasler Pallet &
E.P.S., a pallet/styrofoam  packaging manufacturer,  Arrow & Acme Corporation, a
die-castings   manufacturer,   Beam   Industries,   a  central   vacuum  systems
manufacturer, and Daily Freeman Journal, a newspaper and printing firm.
<PAGE>

         The Company encounters strong  competition both in attracting  deposits
and in originating real estate and other loans. Its most direct  competition for
deposits  has   historically   come  from   commercial   banks,   other  savings
associations, and credit unions. Competition for loans comes from such financial
institutions  as  well  as  mortgage  banking  companies.  The  Company  expects
continued  strong  competition in the foreseeable  future,  including  increased
competition from "super-regional"  banks entering the market by purchasing large
banks and savings  banks.  Many such  institutions  have greater  financial  and
marketing  resources  available  to them  than  does the  Company.  The  Company
competes  for savings  deposits by offering  depositors a high level of personal
service and a wide range of competitively  priced financial services.  In recent
years,  additional  strong  competition has come from stock and bond dealers and
brokers.  The Company  competes  for real  estate  loans  primarily  through the
interest rates and loan fees it charges and advertising.

                                       2
<PAGE>



Lending Activities

         Loan  and  Mortgage-Backed   Securities  Portfolio   Composition.   The
principal   components   of  the  Company's   loan   portfolio  are  fixed-  and
adjustable-rate first mortgage loans secured by one- to four-family  residential
real estate, home equity loans, multi-family residential mortgage loans, and, to
a much lesser  extent,  commercial  real estate  loans and  consumer  loans.  At
December 31, 1999, the Company's net loans receivable totaled $62.2 million,  of
which $50.4 million, or 81.1%, were one- to four-family  residential real estate
mortgage loans, $5.2 million,  or 8.4%, were multi-family  residential and other
loans,  $4.1 million or 6.7%, were home equity loans and $3.6 million,  or 5.8%,
were consumer and other loans.

         The Company also invests in  mortgage-backed  securities  consisting of
pass-through  certificates  insured  or  guaranteed  by the  Federal  Home  Loan
Mortgage  Corporation  ("FHLMC"),  the Government National Mortgage  Association
("GNMA"), or the Federal National Mortgage Association ("FNMA"). At December 31,
1999,  mortgage-backed securities totaled $7.8 million, or 8.3% of total assets.
At December 31, 1999,  60.2% of the Company's  mortgage-backed  securities  were
secured by ARM loans, and 39.8% were secured by fixed-rate  loans. The Company's
policy is to hold mortgage-backed securities to maturity.





<PAGE>


         Analysis of Loan  Portfolio.  Set forth below is selected data relating
to the  composition  of the Company's  loan  portfolio by type of loan as of the
dates indicated.
<TABLE>
<CAPTION>

                                                                                  At December 31,
                                                           --------------------------------------------------------------
                                                                    1999                  1998                1997
                                                              ------------------    ----------------    ----------------
                                                               Amount   Percent     Amount   Percent     Amount  Percent
                                                               ------   -------     ------   -------     ------  -------
 <S>                                                           <C>        <C>       <C>        <C>       <C>       <C>
                                                                                                (Dollars in Thousands)
Real estate loans:
  One- to four-family residential................             $ 50,420    81.07%    $44,047    77.61%    $40,119   73.86%
  Home equity                                                    4,142     6.66       4,347     7.66       4,286    7.89

 Multi-family residential, commercial real estate and other      5,248     8.43       5,961    10.50       6,509   11.98
                                                                ------    -----      ------    -----      ------   -----
    Total real estate loans.......................              59,810    96.16%     54,355    95.77%     50,914   93.73%

Consumer and other loans:

  Automobile......................................               1,682     2.71%      1,536     2.71%      1,687    3.11%
  Home improvement................................               1,083     1.74         963     1.70       1,074    1.98
  Loans on savings deposits.......................                 248      .39         417      .73         423     .78
  Other...........................................                 587      .94         752     1.33         707    1.30
                                                                ------    -----      ------    -----      ------   -----
    Total consumer and other loans................               3,600     5.78%      3,668     6.47%      3,891    7.17%

Commercial(1).....................................                  --       --          --       --          --      --%
Real estate sold on contract......................                 100     0.16         128     0.23         190    0.35
                                                                ------    -----      ------    -----      ------   -----
    Total loans receivable........................              63,510   102.10      58,151   102.47%     54,995  101.37%

Less:
Undisbursed loan proceeds.........................            $    922    1.48%     $   999     1.76%    $   265    0.49%
 Premiums on loans purchased.....................                   (6)  (0.01)%        (11)   (0.02)%       (17)  (0.03)%

Unearned discount and net
    deferred loan fees............................                  20     0.02          26     0.05%         40    0.07%
   Allowance for loan losses......................                 382     0.61%        385     0.68%        385    0.71%
                                                                ------    -----      ------    -----      ------   -----
    Total loans receivable, net...................            $ 62,192   100.00%   $ 56,752   100.00%   $ 54,153  100.00%
                                                              ========   ======    ========   ======    ========  ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                           At December 31,
                                                            --------------------------------------------
                                                                       1996              1995
                                                                 -----------------  ----------------
                                                                 Amount    Percent  Amount   Percent
                                                                 ------    -------  ------   -------
 <S>                                                             <C>        <C>      <C>       <C>

Real estate loans:
  One- to four-family residential................                $38,875    71.79%   38,322    71.86%
  Home equity                                                      3,717     6.31     2,895     5.43

 Multi-family residential, commercial real estate and other        7,798    14.40     8,467    15.88
                                                                  ------    -----    ------    -----
    Total real estate loans.......................                50,390    86.19%   49,684    87.74%

Consumer and other loans:

  Automobile......................................                 1,873     3.45%    1,726     3.24%
  Home improvement................................                 1,069     1.98     1,101     2.07
  Loans on savings deposits.......................                   582     1.07       419     0.79
  Other...........................................                   753     1.39       735     1.38
                                                                  ------    -----    ------    -----
    Total consumer and other loans................                 4,277     7.90%    3,981     7.47%

Commercial(1).....................................                    --      -- %
Real estate sold on contract......................                   269     0.50       391     0.91
                                                                  ------    -----    ------    -----
    Total loans receivable........................                54,936   101.45%   54,056   101.37%

Less:
Undisbursed loan proceeds.........................               $   393     0.73%   $  244     0.46%
 Premiums on loans purchased.....................             %      (21)   (0.04)%     (27)   (0.05)%

Unearned discount and net
    deferred loan fees............................                    52     0.10%       62     0.12%
   Allowance for loan losses......................                   359     0.66%      446     0.84%
                                                                  ------    -----    ------    -----
    Total loans receivable, net...................                54,322   100.00%  $53,331   100.00%
                                                                  ======   ======   =======   ======
</TABLE>

----------------------
(1)   Consists of the Company's participation in a tax abatement bond.

                                       4
<PAGE>
         Loan and Mortgage-Backed  Securities  Maturity Schedule.  The following
table sets forth the maturity or period of repricing of the  Company's  loan and
mortgage-backed  securities  portfolio at December 31, 1999. Demand loans, loans
having no stated schedule of repayments and no stated  maturity,  and overdrafts
are reported as due in one year or less.  Adjustable and floating rate loans are
included  in the period in which  interest  rates are next  scheduled  to adjust
rather  than in which  they  contractually  mature,  and  fixed  rate  loans and
mortgage-backed  securities  are  included  in the  period  in which  the  final
contractual repayment is due.
<TABLE>
<CAPTION>
<S>                                            <C>       <C>       <C>       <C>       <C>        <C>      <C>
                                                                                                      Beyond
                                               Within      1-3        3-5       5-10       10-20       20
                                               1 Year     Years      Years      Years      Years      Years     Total
                                             ------------------------------------------------------------------------
                                                                          (In Thousands)

Real estate loans:
  One- to four-family residential...........   $13,651   $8,051    $ 1,989   $ 9,100   $ 8,769    $13,002  $ 54,562
Multi-family residential, commercial
    real estate and other loans.............    1,734     2,088        108       384       595       339      5,248
Consumer and other loans....................      565     1,849        445       351       377        13      3,600
Real estate sold on contract................       --         1         18        81        --        --        100
                                               ------    ------    -------   -------   -------    ------   --------
    Total loans receivable (gross)..........   15,950    11,989      2,560     9,916     9,741    13,354     63,510
                                               ------    ------    -------   -------   -------   -------   --------
63,510

Mortgage-backed securities (gross)..........    3,150     1,172        160     1,613     1,133       519      7,747
                                               ------    ------    -------   -------   -------    ------   --------

    Total loans and
      mortgage-backed securities............   $19,100   $ 13,161  $ 2,720   $11,529   $10,874    $13,873  $ 71,257
                                               =======   ========  =======   =======   =======    =======  ========
</TABLE>

         Fixed-  and  Adjustable-Rate   Loan  and   Mortgage-Backed   Securities
Schedule. The following table sets forth at December 31, 1999, the dollar amount
of all fixed rate and adjustable rate loans due, and mortgage-backed  securities
that mature, after December 31, 2000.
<TABLE>
<CAPTION>
<S>                                                <C>          <C>          <C>
                                                    Fixed       Adjustable     Total
                                                  ---------    -----------   --------
                                                            (In Thousands)
Real estate loans:
  One- to four-family residential .......          $30,793      $10,118      $40,911
  Multi-family residential, commercial
    real estate and other ...............            1,537        1,977        3,514
Consumer and other loans ................            3,032            3        3,035
Real estate sold on contract ............              100         --            100
                                                   -------      -------      -------
    Total loans receivable (gross) ......          $35,462      $12,098      $47,560
                                                   =======      =======      =======

Mortgage-backed securities (gross) ......          $ 3,832      $   765      $ 4,597
                                                   =======      =======      =======
</TABLE>
<PAGE>

         One- to  Four-Family  Residential  Real  Estate  Loans.  The  Company's
primary lending activity currently consists of the origination of fixed rate and
adjustable-rate  one- to four-family  owner-occupied  residential mortgage loans
collateralized  by properties  located in the Company's market area. The Company
also originates one- to four-family construction loans that convert to permanent
loans after the initial construction period which generally does not exceed nine
months.  The Company is a portfolio  lender.  In recent  years,  it has not sold
loans in the secondary  mortgage market and does not intend to conduct secondary
market  sales  in  the  foreseeable   future.  One-  to  four-family  loans  are
underwritten  and  originated  according  to  policies  approved by the Board of
Directors.  In the current lending environment,  savings deposit growth and loan
repayments  have exceeded  demand for loans.  The Company has purchased  one- to
four-family  mortgage loans  collateralized by properties in Texas and Colorado.
At December 31, 1999,  the Company had an  aggregate  principal  balance of $5.5
million in purchased loans.

         The Company currently offers fixed rate one- to four-family residential
mortgage  loans with terms of up to 30 years.  One- to  four-family  residential
real estate loans often remain  outstanding  for  significantly  shorter periods
than their  contractual terms because borrowers may refinance or prepay loans at
their option.  The average length of time that

                                       5

<PAGE>
the Company's one- to four-family  residential mortgage loans remain outstanding
varies  significantly  depending upon trends in market  interest rates and other
factors.  In recent years, the average maturity of the Company's  mortgage loans
has decreased significantly due to unprecedented volume of refinancing activity.
Accordingly,  estimates of the average length of one- to four-family  loans that
remain outstanding  cannot be made with any degree of accuracy.  Originations of
fixed rate  mortgage  loans are  monitored on an ongoing  basis and are affected
significantly by the level of market interest rates, the Company's interest rate
gap  position,  and loan  products  offered by the  Company's  competitors.  The
Company's  fixed rate mortgage  loans amortize on a monthly basis with principal
and interest due each month.

         The Company also originates adjustable-rate mortgage ("ARM") loans with
a maximum term of up to 30 years.  The Company's  ARM loans have interest  rates
that adjust every year or every three years based on an interest rate index. The
Company's  one-year ARM loans have terms of up to 30 years,  with interest rates
that adjust annually based on changes in the Quarterly  National Average Cost of
Funds for All SAIF Insured  Institutions  (the "SII Index").  The maximum annual
increase in the interest rate charged on the Company's one-year ARM loans is 100
basis points, and the maximum life of the loan increase in interest rates is 600
basis points.  The interest rate on the Company's  three-year  ARM loans adjusts
every  three  years by up to 200 basis  points per  adjustment  based on the SII
Index at the time of  adjustment.  The  maximum  life of the  loan  increase  in
interest rate on the Company's three-year ARM loans is 600 basis points. In 1999
ARM  loan  originations  decreased  as  a  percentage  of  total  mortgage  loan
originations,  due to a lower interest rate  environment and a higher demand for
longer term fixed rate loans. For the years ended December 31, 1999 and December
31,  1998,  the Company  originated  $3.9 million and $3.7 million of ARM loans,
respectively,   which  represented  19.1%  and  25.7%  of  total  mortgage  loan
originations, respectively, during such years.

         The Company's  one- to  four-family  residential  first  mortgage loans
customarily include due-on-sale clauses, which are provisions giving the Company
the right to declare a loan  immediately  due and  payable  in the event,  among
other things,  that the borrower  sells or otherwise  disposes of the underlying
real  property  serving as  security  for the loan.  Due-on-sale  clauses are an
important means of adjusting the rates on the Company's fixed rate mortgage loan
portfolio,  and the  Company  has  generally  exercised  its rights  under these
clauses.

         Regulations  limit  the  amount  that a  savings  association  may lend
relative  to the  appraised  value of the real  estate  securing  the  loan,  as
determined  by an appraisal at the time of loan  origination.  Such  regulations
permit a maximum  loan-to-value  ratio of 100% for residential  property and 90%
for all other real  estate  loans.  The  Company's  lending  policies  limit the
maximum  loan-to-value  ratio on  fixed  rate  loans  without  private  mortgage
insurance to 80% of the lesser of the appraised  value or the purchase  price of
the property to serve as collateral for the loan.

         The  Company  makes  one-  to   four-family   real  estate  loans  with
loan-to-value  ratios of up to 90%; however, for one- to four-family real estate
loans with loan-to-value ratios of between 80% and 90%, the Company requires the
first 20% of the loan amount to be covered by private  mortgage  insurance.  The
Company requires fire and casualty insurance, as well as a certificate of title,
on all properties securing real estate loans made by the Company.

         Low and Moderate  Income  Loans.  The Company  participates  in low- to
moderate-income  home loan programs to qualifying  borrowers.  One loan program,
which is offered through the Company,  enables borrowers to purchase a home with

<PAGE>

a minimum 5% downpayment and a 95% loan-to-value  ratio.  Loans are offered on a
fixed-rate basis with terms of up to 30 years.

         Multi-Family Residential,  Commercial Real Estate and Other Real Estate
Loans.  At December  31,  1999,  the Company had a total of 50 loans  secured by
multi-family and commercial real estate properties.  The Company's  multi-family
real  estate  loans  are  secured  by  multi-family  residences,  such as rental
properties,  and  commercial  real  estate  loans are  secured  by other  income
producing  properties  such as nursing homes and office  buildings.  The Company
also originates multi-family  construction loans that convert to permanent loans
after the  initial  construction  period  which  generally  does not exceed nine
months.  At December 31, 1999, the Company's  multi-family  and commercial  real
estate  loans had an average  principal  balance  of  $105,000  and the  largest
multi-family or commercial real estate loan had a principal balance of $484,000.
Multi-family  and  commercial  real estate  loans  currently  are  offered  with
adjustable  interest  rates,  although in the past the  Company  has  originated
fixed-rate multi-family and commercial real estate loans. The terms of each loan
are  negotiated on a  case-by-case  basis,  although such loans  typically  have
adjustable interest rates tied to a market index with a 600 basis point lifetime
interest  rate cap,  and amortize  over 15 years.  An  origination  fee

                                       6

<PAGE>
of 1% is usually  charged on  multi-family  loans.  The Company  generally makes
multi-family  and commercial  real estate loans up to 75% of the appraised value
of the property securing the loan.

         The Company's  originations of multi-family  and commercial real estate
loans have been limited in recent years because of limited local demand, and the
Company currently does not intend to originate or purchase such loans outside of
its market  area.  However,  as noted  previously,  the  Company has in the past
purchased  out-of-market  loans,  both one-to  four-family and multi-family real
estate,  and the aggregate  principal balance of such loans at December 31, 1999
was $5.5 million.

         Loans secured by  multi-family  and  commercial  real estate  generally
involve a greater  degree of credit  risk than one- to  four-family  residential
mortgage loans and carry larger loan balances.  This increased  credit risk is a
result of several factors, including the concentration of principal in a limited
number of loans and  borrowers,  the effects of general  economic  conditions on
income  producing  properties,  and the increased  difficulty of evaluating  and
monitoring these types of loans. Furthermore,  the repayment of loans secured by
multi-family  and  commercial  real  estate  is  typically  dependent  upon  the
successful operation of the related real estate property.  If the cash flow from
the  project  is  reduced,  the  borrower's  ability  to  repay  the loan may be
impaired.

         Home Equity and Home  Improvement  Loans.  The Company also  originates
home equity and home improvement loans. As of December 31, 1999, home equity and
home  improvement  loans totaled $5.2 million,  or 8.4%, of the Company's  total
loan portfolio.  The Company's home equity and home improvement loans have fixed
interest  rates and are generally for terms of 5 to 10 years,  with a maximum of
15 years.  The Company's home equity and home  improvement  loans are closed-end
loans for specific dollar amounts.  They are secured by the borrower's principal
residence with a maximum  loan-to-value ratio,  including the principal balances
of both the first and second mortgage loans, of 90% or less.

         Other  Consumer  Loans.  To a much  lesser  extent,  the  Company  also
originates  loans secured by savings  deposits,  generally with fixed rates,  as
well as automobile  loans and student loans.  Automobile  loans are made on both
new and used cars,  and are offered for terms of up to 60 months.  The Company's
automobile loans have fixed interest rates and have  loan-to-value  ratios of up
to 80%.  Consumer loans entail greater credit risk than do residential  mortgage
loans,  particularly  in the case of  consumer  loans that are secured by assets
that  depreciate  rapidly,  such  as  automobiles,   mobile  homes,  boats,  and
recreational vehicles.

         Loan  Originations,  Solicitation,  Processing,  and Commitments.  Loan
originations  are derived  from a number of sources  such as real  estate  agent
referrals,  existing  customers,  borrowers,  builders,  attorneys,  and walk-in
customers.  Upon  receiving a loan  application,  the  Company  obtains a credit
report and employment  verification to verify specific  information  relating to
the applicant's  employment,  income, and credit standing. In the case of a real
estate loan,  an  appraiser  approved by the Company  appraises  the real estate
intended to  collateralize  the proposed  loan. An  underwriter in the Company's
loan department  checks the loan application file for accuracy and completeness,
and verifies the information  provided.  Pursuant to the Company's  written loan
policies,  all  loans  are  approved  by the  Loan  Committee,  which  meets  as
necessary.  After the loan is  approved,  a loan  commitment  letter is promptly
issued to the borrower.

         If the loan is approved,  the commitment letter specifies the terms and

<PAGE>

conditions of the proposed loan including the amount of the loan, interest rate,
amortization term, a brief description of the required collateral,  and required
insurance  coverage.  Commitments are typically  issued for 60-day periods.  The
borrower  must  provide  proof of fire and  casualty  insurance  on the property
serving as collateral,  which insurance must be maintained  during the full term
of the loan. A certificate of title, based on a title search of the property, is
generally required on all loans secured by real property.  At December 31, 1999,
the Company had outstanding loan  commitments of $405,400.  This amount does not
include $922,200 of the unfunded portion of loans in process.

                                       7
<PAGE>
         Origination,  Purchase  and Sale of Loans.  The table  below  shows the
Company's originations, purchases and sales of loans for the years indicated.
<TABLE>
<CAPTION>
                                                              Year Ended December 31
                                                      --------------------------------------
<S>                                                   <C>            <C>            <C>                       .
                                                        1999           1998           1997
                                                        ----           ----           ----
                                                                  (In Thousands)


Total loans receivable at beginning of year ....      $ 56,752       $ 54,322       $ 54,153
Loans purchased:
  Real estate:
    Total loans purchased ......................            --             --             --
                                                      --------       --------       --------
Loans originated:
  Real estate ..................................        20,576         14,211
7,358
  Consumer: ....................................         2,857          4,578          4,578
                                                      --------       --------       --------
     Total loans originated ....................        23,433         18,789         11,936
                                                      --------       --------       --------
Loans transferred to REO .......................            --
(74) ...........................................           (59)
Loan repayments ................................       (18,007)       (16,299)       (11,680)
Other loan activity (net) ......................            14             14            (28)
                                                      --------       --------       --------
      Total loans receivable at end of year, net      $ 62,192       $ 56,752       $ 54,322
                                                      ========       ========       ========
</TABLE>

         Loan  Origination  Fees. In addition to interest  earned on loans,  the
Company generally receives fees in connection with loan  originations.  Mortgage
loan  origination  fees and certain loan  origination  costs,  if material,  are
deferred and the net fee or cost is recognized in operations  using the interest
method. Direct loan origination costs on other loans are expensed, as such costs
are not material in amount. Fees deferred are recognized into income immediately
upon  prepayment of the related loan. Such fees vary with the volume and type of
loans and commitments made and purchased,  principal repayments, and competitive
conditions  in the  mortgage  markets,  which in turn  respond to the demand and
availability of money.

Mortgage-Backed Securities

         A significant part of the Company's  business  involves  investments in
mortgage-backed   securities.  At  December  31,  1999,  all  of  the  Company's
mortgage-backed  securities  were  insured  or  guaranteed  by a  United  States
Government agency or sponsored corporation. All of the Company's mortgage-backed
securities portfolio consists of pass-through certificates.  The Company invests
in  mortgage-backed  securities to supplement local loan originations as well as
to reduce interest rate risk exposure.
<PAGE>

         The  Company's  pass-through  certificates  represent  a  participation
interest  in a pool of  single-family  mortgages,  the  principal  and  interest
payments  on  which  are  passed   from  the   mortgage   originators,   through
intermediaries (generally  quasi-governmental  agencies) that pool and repackage
the participation  interest in the form of securities,  to investors such as the
Company.  Such  quasi-governmental   agencies  that  guarantee  the  payment  of
principal  and  interest to  investors,  include the FHLMC,  GNMA,  or the FNMA.
Pass-through  certificates  typically are issued with stated principal  amounts,
and the  securities  are  backed  by pools of  mortgages  that have  loans  with
interest rates and maturities that are within a specified  range. The underlying
pool of  mortgages  can be composed of either fixed rate  mortgage  loans or ARM
loans.  The  interest  rate  risk  characteristics  of the  underlying  pool  of
mortgages, i.e., fixed rate or adjustable rate, are passed on to the certificate
holder.

                                       8
<PAGE>
         Set forth below is  information  relating to the  Company's  purchases,
sales and repayments of mortgage-backed securities for the years indicated.
<TABLE>
<CAPTION>
<S>                                                          <C>            <C>            <C>
                                                                      Year Ended December 31,
                                                               --------------------------------------
                                                                1999          1998            1997
                                                                ----          ----            ----
                                                                         (In Thousands)
Mortgage-backed securities
  at beginning of year: ...............................      $  9,987       $ 14,923       $ 18,579
      Purchases .......................................         1,070             --             --
     Repayments .......................................        (3,226)        (4,906)        (3,632)
     Discount (premium) amortization ..................           (26)           (30)           (18)
                                                             --------       --------       --------
Mortgage-backed securities
  at end of year, net .................................      $  7,805       $  9,987       $ 14,923
                                                             ========       ========       ========
</TABLE>

         The  following   table  sets  forth   selected  data  relating  to  the
composition of the Company's mortgage-backed securities for the years indicated.
<TABLE>
<CAPTION>
<S>                                            <C>         <C>     <C>          <C>     <C>           <C>
                                                                       At December 31,
                                                         ---------------------------------------------
                                                               1999                      1998     1997
                                                               ----                      ----
                                                     $       %         $          %          $         %
                                                   ----    ----      ----       ----       ----       ----

                                                                   (Dollars in Thousands)
Mortgage-backed securities:
  Adjustable.................................. $  4,696    60.2%   $  5,294     53.0%   $  7,631      51.1%
  Fixed.......................................    3,109    39.8       4,693     47.0       7,292      48.9
                                               --------   -----    --------    -----    --------     -----
    Total mortgage-backed
      securities, net......................... $  7,805   100.0%$  $  9,987    100.0%   $ 14,923     100.0%
                                               ========   ===== ===========    =====    ========     =====
</TABLE>

         At December 31, 1999,  mortgage-backed securities totaled $7.8 million,
or 8.3%,  of total  assets.  ARM  loans  collateralized  60.2% of the  Company's
mortgage-backed  securities portfolio, and fixed-rate loans collateralized 39.8%
of the  Company's  mortgage-backed  securities  portfolio.  All of the Company's
mortgage-backed  securities are insured or guaranteed by the FHLMC, the GNMA, or
the FNMA.  At December 31, 1999,  all the Company's  mortgage-backed  securities
were  classified  as "held to  maturity."  At December 31, 1999,  the  Company's
mortgage-backed securities portfolio had a fair value of $7.7 million.

         Effective  February 1992, the OTS adopted Thrift Bulletin 52 ("TB 52").
Among  other  things,  TB 52 sets  forth  certain  guidelines  with  respect  to
depository  institutions' investment in certain "high risk mortgage securities."
"High-risk  mortgage  securities" are defined as any mortgage derivative product
that at the time of  purchase,  or at any  subsequent  date,  meets any of three
tests  that  are  set  forth  in TB 52.  High-risk  mortgage  securities  may be

<PAGE>

purchased  only in limited  circumstances,  and if held in a portfolio,  must be
reported as trading assets at market value, or as  available-for-sale  assets at
the lower of cost or market value. In certain  circumstances,  OTS examiners may
seek the orderly  divestiture of high-risk mortgage  securities.  As of December
31, 1999,  the Company did not hold any "high-risk  mortgage  securities" in its
portfolio.

Delinquencies and Classified Assets

         Delinquencies.  The Company's collection procedures provide that when a
loan is 15 days past due, a computer-generated late charge notice is sent to the
borrower requesting payment, plus a late charge. If delinquency continues, early
in the  second  month,  a  delinquent  notice is mailed  along  with a letter or
telephone  call  advising that the  mortgagors  are in violation of the terms of
their  mortgage  contract.  If a loan becomes 60 days past due, the loan becomes
subject to possible legal action. Management has been authorized by the Board of
Directors  to send a letter  during the third

                                       9
<PAGE>
month advising of pending legal action.  This letter generally grants mortgagors
an  additional  15 days to bring the account to date prior to start of any legal
action.  If not paid,  foreclosure  proceedings  are  initiated.  To the  extent
required by the Department of Housing and Urban Development ("HUD") regulations,
generally  within 45 days of  delinquency,  a Section 160 HUD notice is given to
the borrower, which provides access to consumer counseling services.

         It is sometimes  necessary and desirable to arrange  special  repayment
schedules with mortgagors to prevent  foreclosure or filing for bankruptcy.  The
mortgagors are required to submit a written repayment schedule, which is closely
monitored  for  compliance.  Under these terms,  the account is brought to date,
usually within a few months.

         Nonperforming  Assets.  Loans are  reviewed on a regular  basis and are
placed on a nonaccrual status when, in the opinion of management, the collection
of  additional  interest is doubtful.  Mortgage  loans are placed on  nonaccrual
status  generally  when either  principal  or interest is more than 90 days past
due.  Interest  accrued  and  unpaid at the time a loan is placed on  nonaccrual
status is charged against interest income.

         Real estate  acquired by the Company as a result of  foreclosure  or by
deed in lieu of  foreclosure is deemed real estate owned ("REO") until such time
as it is sold. In general,  the Company  considers  collateral  for a loan to be
in-substance  foreclosed  if:  (i) the  borrower  has little or no equity in the
collateral; (ii) proceeds for repayment of the loan can be expected to come only
from the operation or sale of the collateral;  and (iii) the borrower has either
formally or effectively  abandoned control of the collateral to the Company,  or
retained  control of the collateral but is unlikely to be able to rebuild equity
in the collateral or otherwise  repay the loan in the foreseeable  future.  Cash
flow  attributable to  in-substance  foreclosures is used to reduce the carrying
value of the collateral.

         When REO is  acquired  or  otherwise  deemed REO, it is recorded at the
lower of the unpaid principal  balance of the related loan or its estimated fair
value, less estimated selling expenses. Valuations are periodically performed by
management,  and any subsequent  decline in fair value is charged to operations.
At December 31, 1999, the Company had no REO.

         Delinquent  Loans and  Nonperforming  Assets.  The following table sets
forth  information  regarding  non-accrual  loans delinquent 90 days or more and
real  estate  owned  by the  Company  at the  dates  indicated.  When a loan  is
delinquent  90 days or more,  the Company  fully  reserves all accrued  interest
thereon and ceases to accrue interest thereafter. See notes 1 and 3 to the Notes
to Consolidated Financial Statements.
<TABLE>
<CAPTION>

                                                                               At December 31,
                                                           -------------------------------------------------------
                                                              1999       1998        1997        1996         1995
                                                           --------    --------    ------      ------       ------
                                                                           (Dollars in Thousands)
<S>                                                       <C>         <C>          <C>         <C>          <C>
Delinquent loans:
  One- to four-family residential real estate........     $   --      $   --       $    --     $    22      $  620
  All other real estate..............................         --          --            --          --          --
  Consumer loans, other..............................          6          15                         4          11
                                                           -----      ------       -------     -------      ------
    Total delinquent loans...........................          6          15            --          26         631
Total real estate owned (1)..........................         --          22            59         101          84
                                                          ------      ------       -------     -------      ------
      Total non-performing assets....................     $    6      $   37       $    59     $   127      $  715
                                                          ======      ======       =======     =======      ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                       <C>         <C>          <C>         <C>          <C>
Total loans delinquent 90 days or more
  to net loans receivable............................     0.01%       0.03%        0.00%       0.05%        1.18%
Total loans delinquent 90 days or more
  to total assets....................................     0.01%       0.02%        0.00%       0.03%        0.65%
Total non-performing loans and REO
  to total assets....................................     0.01%       0.04%        0.06%       0.14%        0.74%
</TABLE>

------------------------------------
(1)  Represents the net book value of property  acquired by the Company  through
     foreclosure or deed in lieu of foreclosure. Upon acquisition, this property
     is recorded at the lower of its fair value,  less estimated  selling costs,
     or the principal balance of the related loan.

                                       10

<PAGE>
         The  following  table  sets  forth  information  with  respect to loans
delinquent 30-89 days in the Company's portfolio for the years indicated.
<TABLE>
<CAPTION>

                                                                                       At December 31,
                                                            ---------------------------------------------------------------
                                                             1999        1998        1997        1996         1995
                                                            ------      ------      ------      ------       ------
                                                                                (In Thousands)
<S>                                                       <C>         <C>          <C>         <C>          <C>
Loans past due 30-89 days:
  One- to four-family residential....................     $  445      $  521       $   632     $   613      $  840
  All other mortgages................................         --          --            20          62          --
       --  Consumer, other...........................         60          94            63          74         105
                                                          ------      ------       -------     -------      ------
    Total past due 30-89 days........................     $  505      $  615       $   715     $   749      $  945
                                                          ======      ======       =======     =======      ======
</TABLE>

         The  following  table  sets  forth  information  with  respect  to  the
Company's delinquent loans and other problem assets at December 31, 1999.
<TABLE>
<CAPTION>

                                                                                         At  December  31, 1999
                                                                                     -----------------------------

                                                                                     Balance               Number
                                                                                     -------               ------
                                                                                         (Dollars in Thousands)
<S>                                                                                  <C>                      <C>

Residential real estate:
  Loans 30 to 89 days delinquent.......................................              $   445                  16
  Loans 90 days or more delinquent.....................................                   --                  --
All other real estate loans:
  Loans 30 to 89 days delinquent.......................................                   --                  --
  Loans 90 days or more delinquent.....................................                   --                  --
Commercial non-real estate (30 days or more delinquent)................                   --                  --
Consumer loans (30 days or more delinquent)............................                   60                  12
Foreclosed real estate and repossessions...............................                   --                  --
Other non-performing assets............................................                   --                  --
Restructured loans within the meaning of Statement of
  Financial Accounting Standards No. 15 (not included
  in other nonperforming categories above).............................                   --                  --
Loans to facilitate sale of real estate owned..........................                  100                   7
</TABLE>


         Classification  of  Assets.   Federal   regulations   provide  for  the
classification  of loans and other  assets  such as debt and  equity  securities
considered by the OTS to be of lesser quality as  "substandard,"  "doubtful," or
"loss"  assets.  An  asset is  considered  "substandard"  if it is  inadequately
protected by the current net worth and paying  capacity of the obligor or of the
collateral pledged, if any.  "Substandard" assets include those characterized by
the "distinct possibility" that the savings institution will sustain "some loss"
if the deficiencies are not corrected.  Assets classified as "doubtful" have all

<PAGE>

of the weaknesses  inherent in those  classified  "substandard,"  with the added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
that do not  expose  the  savings  institution  to risk  sufficient  to  warrant
classification in one of the aforementioned  categories,  but which possess some
weaknesses, are required to be designated "special mention" by management. Loans
designated  as special  mention  are  generally  loans  that,  while  current in
required  payments,  have  exhibited  some  potential  weaknesses  that,  if not
corrected, could increase the level of risk in the future. At December 31, 1999,
the Company had no special mention loans, $564,000 substandard assets and $3,000
doubtful assets.

                                       11
<PAGE>
         The following  table sets forth the  aggregate  amount of the Company's
classified assets for the years indicated.
<TABLE>
<CAPTION>
<S>                                                    <C>                   <C>                  <C>
                                                                       Year Ended December 31,
                                                        -------------------------------------------------
                                                           1999                 1998                 1997
                                                        ----------           ----------           -------
                                                                            (In Thousands)

Substandard assets...............................      $     564             $    437             $     625
Doubtful assets..................................              3                   --                    --
Loss assets......................................             --                    2                    --
                                                       ---------             --------             ---------
     Total classified assets.....................      $     567             $    439             $     625
                                                       =========             ========             =========
</TABLE>

         Allowance  for Loan  Losses.  Management's  policy  is to  provide  for
estimated   losses  on  the  Company's  loan  portfolio  based  on  management's
evaluation of the estimated losses that may be incurred.  The Company  regularly
reviews its loan portfolio,  including  problem loans, to determine  whether any
loans require  classification  or the  establishment of appropriate  reserves or
allowances for losses. Such evaluation,  which includes a review of all loans of
which full  collectibility  of  interest  and  principal  may not be  reasonably
assured,  considers,  among  other  matters,  the  estimated  fair  value of the
underlying collateral.  During the years ended December 31, 1999, 1998 and 1997,
the Company added $ 0, $ 0, and $40,000, respectively, to the provision for loan
losses. The Company's allowance for loan losses totaled $382,000,  $385,000, and
$385,000 at December 31, 1999, 1998, and 1997, respectively.

         Management  believes  that the  allowances  for  losses  on  loans  and
investments  in real  estate  are  adequate.  While  management  uses  available
information to recognize losses on loans and investments in real estate,  future
additions  to the  allowances  may be  necessary  based on changes  in  economic
conditions.  In addition,  various regulatory  agencies,  as an integral part of
their  examination  process,  periodically  review the Company's  allowances for
losses on loans and  investments  in real estate.  Such agencies may require the
Company to recognize  additions to the allowances based on their judgments about
information available to them at the time of their examination.

         Analysis of the  Allowance For Loan Losses.  The  following  table sets
forth the analysis of the allowance for loan losses for the years indicated.
<TABLE>
<CAPTION>
<S>                                                 <C>           <C>          <C>           <C>           <C>

                                                                         Year Ended December 31,
                                                       -----------------------------------------------------------
                                                       1999            1998        1997        1996           1995
                                                       ----           -----        ----        ----           ----
                                                                         (Dollars in Thousands)

Net loans outstanding.........................      $62,192       $56,572      $ 54,322      $54,153       $53,331
Average net loans outstanding.................       58,312        55,704        54,058       53,536        50,524
                                                    =======      ========      ========      =======       =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                 <C>           <C>          <C>           <C>           <C>

Allowance balances (at beginning of year).....          385           385           359          446           440
Provision for losses..........................            0             0            40          125            15
Charge-offs...................................            9             1            15          228            14
Recoveries....................................            6             1             1           16             5
                                                    -------      --------      --------      -------       -------

Allowance balance (at end of year)............      $   382      $    385      $    385      $   359       $   446
                                                     ======      ========      ========      =======       =======

Allowance for loan losses as a percent
of net loans receivable at end of year........      0.61%        0. 68%          0.71%         0.67%         0.83%
Net loans charged off as a percent
  of average net loans outstanding............      0.01%        0. 00%          0.03%          043%         0.03%
Ratio of allowance for loan losses
  to total nonperforming loans
  at end of year..............................       N/M           N/M            N/M            N/M        70.77%
Ratio of allowance for loan losses
  to total nonperforming loans and REO
  at end of year..............................       N/M           N/M           652.54%        281.81%     62.47%
</TABLE>

                                       12
<PAGE>
 Investment Activities

         The Company's  investment  portfolio comprises  investment  securities,
FHLB stock, and interest-earning deposits in other institutions. The Company has
no  investments  in corporate or unrated  securities.  At December 31, 1999,  no
investment  securities  was  scheduled  to  mature  in one year or  less,  $13.5
million,  or 90.5%,  was scheduled to mature in from one to five years, and $1.4
million or 9.5% was scheduled to mature in over five years.

         The Company is required under federal regulations to maintain a minimum
amount of liquid assets that may be invested in specified short-term  securities
and certain other investments.  The Company generally has maintained a portfolio
of liquid assets that exceeds regulatory  requirements.  Liquidity levels may be
increased or decreased depending upon the yields on investment  alternatives and
upon management's judgment as to the attractiveness of the yields then available
in relation to other  opportunities  and its  expectation  of the level of yield
that will be available in the future, as well as management's  projections as to
the short term demand for funds to be used in the Company's loan origination and
other  activities.  Currently,  due to lower  demand  for loans,  the  Company's
liquidity  levels are higher than they have been in recent  periods.  Management
believes  that the higher  levels are prudent  because of the  possibility  that
interest  rates may  increase.  By  maintaining  high levels of  liquidity,  the
Company is able to reinvest  its assets  more  quickly in response to changes in
market interest  rates,  thereby  potentially  reducing its exposure to interest
rate volatility.

         Investment Portfolio. The following table sets forth the carrying value
of the Company's investment portfolio for the years indicated.
<TABLE>
<CAPTION>
 <S>                                                           <C>                    <C>                  <C>
                                                                          Year Ended December 31,
                                                               ---------------------------------------------
                                                                  1999                 1998                 1997
                                                               ----------           ---------              -------
                                                                                  (In Thousands)
Investment portfolio:
  U.S. Government and agency obligations...........           $  14,916              $ 9,899              $ 16,638
  Interest-earning deposits in other institutions..               6,824               15,171                 6,554
  FHLB stock.......................................                 613                  613                   780
                                                              ---------             --------             ---------
    Total investments..............................           $  22,353             $ 25,683             $  23,972
                                                              =========             ========             =========
</TABLE>

                                       13
<PAGE>

         Investment  Portfolio  Maturities.  The following  table sets forth the
scheduled maturities, carrying values, market values and weighted average yields
for the Company's investment portfolio at December 31, 1999
 (Dollars in Thousands)
<TABLE>
<CAPTION>
<S>                                       <C>          <C>       <C>        <C>       <C>         <C>        <C>        <C>

                                                                       At December 31, 1999
                                  ----------------------------------------------------------------------------------------------

                                         One Year or Less         One to Five Years      Five to Ten        More than Ten Years
                                  ----------------------------  -------------------- --------------------  ---------------------

                                                    Annualized            Annualized           Annualized             Annualized
                                                     Weighted              Weighted             Weighted               Weighted
                                          Carrying    Average   Carrying    Average  Carrying   Average     Carrying   Average
                                            Value      Yield     Value       Yield     Value     Yield        Value     Yield
                                            -----      -----     -----       -----     -----     -----        -----     -----

Investment portfolio:
   Investment securities, U.S. Government    $ --        -- %    $ 13,498    5.60%    $1,418     6.12%       $ --          --%
FHLB stock.....................               613      6.30            --      --         --       --          --          --
  Interest-earning deposits....
    in other institutions......             6,824      5.32            --      --         --       --                      --
                                           -------    -----      --------  ------     ------     -----       ----       -----
      Total....................           $ 7,437      5.40%     $ 13,498   5.60%     $1,418      6.12%      $ --          --%
                                          =======      ====      ========   ====      ======      ====       ====       =====
</TABLE>



                                             At December 31, 1999
                                           -------------------------
                                                     Total
                                           -------------------------
                                                         Annualized
                                                          Weighted
                                              Carrying     Average
                                                Value       Yield
                                                -----       -----

Investment portfolio:
   Investment securities, U.S. Government     $14,916       6.07%
FHLB stock.....................                   613       6.30
  Interest-earning deposits....
    in other institutions......                 6,824       5.32
                                              -------       ----
      Total....................               $22,353       5.83%
                                              =======       ====

                                       14
<PAGE>

Sources of Funds

         General.  The  Company's  deposit-gathering  activities  are  currently
conducted from the Company's  facility in Webster City,  Iowa.  Deposits are the
major source of the Company's funds for lending and other  investment  purposes.
In addition to deposits,  the Company  derives funds from the  amortization  and
prepayment of loans and mortgage-backed  securities,  the maturity of investment
securities, and operations. Scheduled loan principal repayments are a relatively
stable source of funds,  while deposit inflows and outflows and loan prepayments
are influenced  significantly by general  interest rates and market  conditions.
Borrowings may be used on a short-term basis to compensate for reductions in the
availability  of funds from other  sources or on a longer term basis for general
business  purposes.  Historically,  the Company has  maintained  a high level of
liquidity, and only rarely uses borrowed funds.

         Deposits.  Consumer and commercial  deposits are attracted  principally
from within the Company's  market area through the offering of a broad selection
of deposit instruments  including NOW accounts,  passbook savings,  money market
deposit, term certificate accounts and individual  retirement accounts.  Deposit
account terms vary according to the minimum balance required, the period of time
during  which the funds must remain on deposit,  and the  interest  rate,  among
other factors. The maximum rate of interest,  which the Company must pay, is not
established  by  regulatory  authority.  The  Company  regularly  evaluates  its
internal cost of funds, surveys rates offered by competing institutions, reviews
the Company's cash flow  requirements  for lending and  liquidity,  and executes
rate  changes  when deemed  appropriate.  The Company has sought to decrease the
risk associated with changes in interest rates by offering  competitive rates on
deposit  accounts and by pricing  certificates  of deposit to provide  customers
with incentives to choose  certificates of deposit with longer terms. Due to the
current  interest  rate  environment,  however,  terms of over 36 months are not
attractive  to  customers.  The Company  does not obtain funds  through  brokers
through a  solicitation  of funds  outside its market  area.  The  Company  also
obtains  funds from  local  governmental  sources  and held  approximately  $3.3
million in such funds at December 31, 1999.

         Deposit Portfolio. Savings in the Company as of December 31, 1999, were
represented by the various types of deposit programs described below.


<TABLE>
<CAPTION>
<S>                     <C>              <C>                               <C>            <C>              <C>
  Weighted                                                                                             Percentage
   Average                                                                                              of Total
Interest Rate        Minimum Term        Checking and Savings Deposits       Amount       Balances      Deposits
-------------        ------------        -----------------------------       ------       --------      --------
                                                                                       (In Thousands)

   0.00%                 None             Noninterest-bearing checking     $     --       $    898          1.32%
   1.75                  None             NOW accounts                           --          6,808         10.02
   2.51                  None             Passbook                               --          4,730          6.96
   3.29                  None             Money market accounts               1,000          6,036          8.89

                                                                                   Certificates of Deposit

   4.10%                3 months          Fixed term, fixed rate           $  1,000       $  1,209          1.78%
   4.55                 6 months          Fixed term, fixed rate              1,000          3,549          5.23
   5.24                 9 months          Fixed term, fixed rate              1,000          4,511          6.64
   4.42                12 months          Fixed term, fixed rate              1,000         10,109         14.88
   5.80                15 months          Fixed term, fixed rate              1,000          5,022          7.39
   4.38                18 months          Fixed term, fixed rate              1,000          3,126          4.60
   4.78                24 months          Fixed term, fixed rate              1,000          5,268          7.76
   5.27                30 months          Fixed term, fixed rate              1,000          3,424          5.04
   5.18                36 months          Fixed term, fixed rate              1,000          2,918          4.30
   5.17                48 months          Fixed term, fixed rate              1,000            954          1.41
   5.99             Over 48 months        Fixed term, fixed rate              1,000          9,356         13.78
                                                                                          ---------       -------
                                                                                         $  67,918        100.00%
</TABLE>
                                       15

<PAGE>


--------------------------------------------------------------------------------
         The  following  table sets forth the change in dollar amount of savings
deposits in the various types of savings accounts offered by the Company between
the dates indicated.

<TABLE>
<CAPTION>
<S>                           <C>             <C>   <C>         <C>             <C>   <C>         <C>             <C>   <C>

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

                                            1999                          1998                          1997
                                     -------------------          --------------------          --------------------
                                Balance    Percent(1) Change(2)  Balance     Percent(1) Change(2) Balance    Percent(1)  Change(2)
                                                                                                   (In Thousands)
Noninterest-bearing
  demand .................    $   898         1.32% $   586     $   312         0.45% $  (392)    $   704         0.98% $    20
NOW accounts .............      6,808        10.02      (61)      6,869        10.00      622       6,247         8.73      915
Passbooks ................      4,730         6.96      240       4,490         6.54      223       4,267         5.97     (310)
Money market accounts ....      6,036         8.89      140       5,896         8.58      466       5,430         7.59     (109)

Time deposits that mature:
  within 12 months .......     34,917        51.41    3,562      31,355        45.64   (2,277)     33,632        47.02     (838)
  within 12-36 months ....     13,587        20.01   (4,348)     17,935        26.10      121      17,814        24.91   (1,319)
  beyond 36 months .......        942         1.39     (905)      1,847         2.69   (1,586)      3,433         4.80    2,216
                              -------    ------     -------     -------    ------     -------     -------    ------     -------
     Total ...............    $67,918       100.00% $  (786)     68,704       100.00% $(2,823)    $71,527       100.00% $   575
</TABLE>



                                                  At December 31,
                                  ----------------------------------------------
                                              1996                        1995
                                      ---------------------------        -------
                                 Balance     Percent(1)    Change(2)     Balance
                                 -------     ----------    ---------     -------

Noninterest-bearing
  demand .................      $   684         0.96%     $   186       $   498
NOW accounts .............        5,332         7.51         (651)        5,983
Passbooks ................        4,577         6.45         (288)        4,865
Money market accounts ....        5,539         7.81         (235)        5,774

Time deposits that mature:
  within 12 months .......       34,470        48.58          407        34,063
  within 12-36 months ....       19,133        26.97          870        18,263
  beyond 36 months .......        1,217         1.72       (3,214)        4,431
                                -------        ------      -------       -------
     Total ...............      $70,952       100.00%     $(2,925)      $73,877


(1)  Represents percentage of total deposits.
(2)  Represents increase (decrease) in balance from end of prior year.


                                       16
<PAGE>

         Time Deposit Rates. The following table sets forth the time deposits in
the Company classified by rates as of the dates indicated:

                                               Years Ended December 31,
                                       -----------------------------------------
                                         1999          1998              1997
                                       ------------------------        ---------
                                            (In Thousands)
Rate

4.00-5.99%............................ $  44,999     $ 45,105        $   46,075
6.00-7.99%............................     4,446        6,032             8,804
8.00-9.99%............................        --           --                --
                                       ---------     --------         ---------
                                       $  49,445     $ 51,137         $  54,879
                                       =========     ========         =========


         Time Deposit Maturities.  The following table sets forth the amount and
maturities of time deposits at December 31, 1999.
<TABLE>
<CAPTION>
<S>                                     <C>          <C>       <C>        <C>         <C>       <C>         <C>

                                                                        Amount Due
                                       --------------------------------------------------------------------------
                                       Less Than      1-2        2-3        3-4        4-5      After 5
                                        One Year     Years      Years      Years      Years      Years      Total
                                       ----------  ---------  ---------  ---------  ---------  ---------  -------
                                                                      (In Thousands)
Rate

5.99% or less.......................    $31,480      $8,525    $  2,060   $ 1,992     $  942    $     --    $ 44,999
6.00-7.99%..........................      3,437          --         970        39         --          --       4,446
                                        -------     -------    --------   -------    -------    --------    --------
                                        $34,917     $ 8,525    $  3,030   $ 2,031     $  942    $     --    $ 49,445
                                        =======     =======    ========   =======    =======    ========    ========
</TABLE>


         Large Certificates of Deposit Maturities. The following table indicates
the amount of the Company's  certificates of deposit of $100,000 or more by time
remaining  until  maturity at December  31,  1999.  This amount does not include
checking  and  savings   deposits  of  greater  than  $100,000,   which  totaled
approximately $3.2 million at December 31, 1999.

                                                                 Certificates
         Maturity Period                                          of Deposit
                                                                (In Thousands)

         Three months or less................................      $ 2,626
         Three through six months............................        2,835
         Six through twelve months...........................          874
         Over twelve months..................................          782
                                                                   -------
              Total..........................................      $ 7,117
                                                                   =======

<PAGE>


         Change in Deposits.  The  following  table sets forth  changes in total
deposits of the Company for the periods indicated:
<TABLE>
<CAPTION>
<S>                                                    <C>               <C>               <C>

                                                                      Year Ended December 31,
                                                       --------------------------------------
                                                         1999               1998              1997
                                                       -------            --------          -------
                                                                      (In Thousands)

Deposits...........................................    $117,534          $115,309$          116,818
Withdrawals........................................     119,630           119,228           117,412
                                                        -------           -------           -------
Net decrease before interest credited..............      (2,096)           (3,919)             (594)
Interest credited..................................       1,310             1,096             1,169
                                                      ---------          --------          --------
  Net (decrease) increase in deposits..............   $    (786)         $  2,823          $    575
                                                      ==========        ===========================
</TABLE>

                                       17
<PAGE>
Borrowings

         Deposits are the  Company's  primary  source of funds.  The Company may
also obtain funds from the FHLB.  FHLB advances are  collateralized  by selected
assets of the Company. Advances from the FHLB are secured by the Company's stock
in the FHLB and a portion of the Company's  first  mortgage loans and investment
securities.  Historically,  the Company has rarely used borrowed  funds,  but at
December 31, 1999, the Company had $3.2 million in borrowed funds.

The FHLB functions as a central  reserve bank  providing  credit for the Company
and other member savings associations and financial  institutions.  As a member,
the Company is required to own capital  stock in the FHLB and is  authorized  to
apply  for  advances  on the  security  of such  stock and  certain  of its home
mortgages and other assets (principally,  securities that are obligations of, or
guaranteed  by,  the  United  States)  provided  certain  standards  related  to
creditworthiness  have been met. Advances are made pursuant to several different
programs. Each credit program has its own interest rate and range of maturities.
Depending on the program, limitations on the amount of advances are based either
on a fixed  percentage  of a member  institution's  net  worth or on the  FHLB's
assessment of the institution's creditworthiness.

The following table sets forth certain information  regarding  borrowings by the
Company at the dates indicated`

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

                                                    1999      1998        1997
                                                    ----      ----       -----

Weighted average rate paid on FHLB advance.......  5.26%      4.79%       N/A
Rate paid on ESOP Borrowings.....................  0.00%      6.75%       6.75%


<TABLE>
<CAPTION>
<S>                                               <C>               <C>              <C>

                                                     During   the   Year   Ended  December 31,
                                                    -------------------------------------------
                                                       1999            1998         1997
                                                     --------       ---------      -------
                                                              (Dollars in Thousands)

Maximum amount of FHLB Advance
   outstanding at any month.....................  $   3,200         $  1,200         N/A

Approximate average FHLB advance
  outstanding...................................      1,533            1,200         N/A

Approximate weighted average rate
  paid on FHLB advance..........................       5.26%            4.79%        N/A

Approximate average ESOP borrowing
  outstanding...................................         00               201        276

Approximate weighted average rate
  Paid on ESOP borrowing........................       0.00%            6.75%        6.75%
</TABLE>


<PAGE>




Employees

       As of December  31, 1999,  the Company had 21  full-time  and 4 part-time
employees,  none of whom is  represented  by a collective  bargaining  unit. The
Company considers its relationship with its employees to be good.

                                       18
<PAGE>
                           REGULATION AND SUPERVISION

         As a federally chartered SAIF-insured savings association,  the Company
is subject to examination,  supervision and extensive  regulation by the OTS and
the FDIC. The Company is a member of the Federal Home Loan Bank ("FHLB") system.
This  regulation  and  supervision  establishes  a  comprehensive  framework  of
activities in which an institution can engage and is intended  primarily for the
protection of the insurance fund and depositors.  The Company also is subject to
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") governing reserves to be maintained against deposits and certain
other  matters.  The OTS  examines  the  Company  and  prepares  reports for the
consideration of the Company's Board of Directors on any deficiencies  that they
may find in the Company's operations.  The FDIC also examines the Company in its
role as the  administrator  of the SAIF.  The  Company's  relationship  with its
depositors and borrowers also is regulated to a great extent by both federal and
state laws  especially in such matters as the ownership of savings  accounts and
the form and content of the Company's mortgage documents.


Federal Regulation of Savings Institutions

         Business  Activities.   The  activities  of  savings  institutions  are
governed by the Home  Owners'  Loan Act, as amended (the "HOLA") and, in certain
respects, the Federal Deposit Insurance Act (the "FDI Act"). The federal banking
statutes,  as  amended  by  the  Financial  Institutions  Reform,  Recovery  and
Enforcement  Act of 1989 ("FIRREA") and Federal  Deposit  Insurance  Corporation
Improvement Act ("FDICIA") (1) restrict the solicitation of brokered deposits by
savings institutions that are troubled or not well-capitalized, (2) prohibit the
acquisition  of any corporate debt security that is not rated in one of the four
highest rating categories, (3) restrict the aggregate amount of loans secured by
non-residential  real estate property to 400% of capital, (4) permit savings and
loan  holding   companies  to  acquire  up  to  5%  of  the  voting   shares  of
non-subsidiary  savings  institutions  or  savings  and loan  holding  companies
without prior approval, and (5) permit bank holding companies to acquire healthy
savings institutions.

         The description of statutory  provisions and regulations  applicable to
savings  associations  set  forth  herein  does  not  purport  to be a  complete
description  of such statutes and  regulations  and their effect on the Company.
Moreover,  because some of the  provisions of FDICIA are still in the process of
being  implemented  through the adoption of regulations  by the various  federal
banking  agencies,  the  Company  cannot  yet fully  assess  the impact of these
provisions on its operations.

         Loans  to One  Borrower.  Under  the  HOLA,  savings  institutions  are
generally  subject  to the  national  bank  limits on loans to one  borrower  or
related  group of  borrowers.  Generally,  this  limit  is 15% of the  Company's
unimpaired  capital and surplus on an unsecured basis. An additional  amount may
be lent, equal to 10% of unimpaired capital and surplus, if such loan is secured
by readily marketable collateral, which is defined to include certain securities
and bullion,  but generally does not include real estate.  The Company's maximum
loans-to-one-borrower  limit  was $1.0  million  at  December  31,  1999.  As of
December 31, 1999, the Company was in compliance with its  loans-to-one-borrower
limitations.

         Qualified Thrift Lender Test. The HOLA requires savings institutions to
meet a qualified  thrift  lender  ("QTL")  test.  Under the QTL test,  a savings
association  is  required to  maintain  at least 65% of its  "portfolio  assets"
(total assets less (i) specified  liquid assets up to 20% of total assets,  (ii)

<PAGE>

intangibles, including goodwill, and (iii) the value of property used to conduct
business)  in certain  "qualified  thrift  investments,"  primarily  residential
mortgages and related investments, including certain mortgage-backed and related
securities  on a monthly  average  basis in 9 out of every 12 months.  A savings
association  that fails the QTL test must  either  convert to a bank  charter or
operate  under  certain  restrictions.   Recent  legislation  has  expanded  the
qualified  thrift  lender  test to provide  savings  associations  with  greater
authority to lend and diversify their portfolios. In particular, credit card and
education  loans may now be made by savings  associations  without regard to any
percentage-of-assets  limit, and commercial loans may be made in an amount up to
10% of total assets, plus and additional 10% for small business loans. Loans for
personal,  family and household purposes (other than credit card, small business
and educational loans) are now included without limit with other assets that, in
the

                                       19
<PAGE>
aggregate,  may account for up to 20% of total  assets.  As of December 31,
1999, the Company  maintained 88.86% of its portfolio assets in qualified thrift
investments and, therefore, met the QTL test.

         Limitation on Capital Distributions. OTS regulations impose limitations
upon all capital distributions by savings institutions,  such as cash dividends,
payments to repurchase or otherwise acquire its shares, payments to stockholders
of another  institution  in a cash-out  merger and other  distributions  charged
against  capital.  The rule establishes  three tiers of institutions,  which are
based primarily on an institution's  capital level. An institution,  such as the
Company,  that exceeds all fully phased-in capital requirements before and after
a proposed capital  distribution ("Tier 1 Association") and has not been advised
by the OTS that it is in need of more  than  normal  supervision,  could,  after
prior  notice but without the approval of the OTS,  make  capital  distributions
during a calendar  year equal to the greater of: (i) 100% of its net earnings to
date during the calendar  year plus the amount that would reduce by one-half its
"surplus  capital  ratio" (the excess capital over its fully  phased-in  capital
requirements)  at the  beginning  of the calendar  year;  or (ii) 75% of its net
earnings for the previous four quarters; provided that the institution would not
be undercapitalized, as that term is defined in the OTS Prompt Corrective Action
regulations,   following  the  capital  distribution.   Any  additional  capital
distributions  would  require  prior  regulatory  approval.  In  the  event  the
Company's capital fell below its fully-phased in requirement or the OTS notified
it that it was in need of more than normal supervision, the Company's ability to
make capital  distributions  could be  restricted.  In  addition,  the OTS could
prohibit  a  proposed  capital  distribution  by any  institution,  which  would
otherwise  be  permitted  by the  regulation,  if the OTS  determines  that such
distribution  would  constitute an unsafe or unsound  practice.  See  "--Holding
Company Regulation--Dividend Waivers."

         The OTS has  adopted new  regulations,  effective  April 1, 1999,  that
revise  the  current  capital  distribution  restrictions.  The new  regulations
eliminate  the  current  tiered   structure  and  the   safe-harbor   percentage
limitations.  Under the new regulations a savings association may make a capital
distribution  without  notice to the OTS (unless it is a subsidiary of a holding
company)  provided  that  it has a  CAMEL  1 or 2  rating,  is  not in  troubled
condition (as defined by regulation) and would remain adequately capitalized (as
defined in the OTS prompt corrective action regulations)  following the proposed
distribution.  Savings  associations  that would remain  adequately  capitalized
following the proposed distribution but do not meet the other noted requirements
must notify the OTS 30 days prior to declaring a capital  distribution.  The OTS
stated  it  will  generally   regard  as  permissible  that  amount  of  capital
distributions  that do not exceed  50% of the  institution's  excess  regulatory
capital plus net income to date during the calendar year. A savings  association
may not make a capital  distribution  without prior  approval of the OTS and the
FDIC if it is  undercapitalized  before, or as a result of, such a distribution.
As under the current rule,  the OTS may object to a capital  distribution  if it
would constitute an unsafe or unsound practice. The Company qualifies for Tier 1
and has declared and paid  dividends of $751,500  during the year ended December
31, 1999.

         Liquidity. The Company is required to maintain an average daily balance
of liquid assets (cash, certain time deposits,  bankers' acceptances,  specified
U.S. Government,  state or federal agency obligations,  shares of certain mutual
funds and certain  corporate debt  securities  and commercial  paper) equal to a
monthly average of not less than a specified  percentage of its net withdrawable
deposit  accounts plus  borrowings  payable in one year or less.  This liquidity
requirement  is currently 4%, may be changed from time to time by the OTS to any
amount within the range of 4% to 10% depending upon economic  conditions and the
savings flow of member  institutions.  OTS regulations also require each savings

<PAGE>

institution to maintain an average daily balance of short-term  liquid assets at
a  specified  percentage  (currently  1%) of the  total of its net  withdrawable
deposit accounts and borrowings payable in one year or less.  Monetary penalties
may be imposed for failure to meet these liquidity  requirements.  The Company's
average  liquidity  ratio for December 1999 was 28.58%,  which exceeded the then
applicable  requirements.  The  Company  has  never  been  subject  to  monetary
penalties for failure to meet its liquidity requirements.

         Assessments. Savings institutions are required by OTS regulation to pay
assessments  to  the  OTS  to  fund  the  operations  of the  OTS.  The  general
assessment,   paid  on  a  semi-annual  basis,  is  computed  upon  the  savings
institution's consolidated total assets, as reported in the institution's latest
quarterly  thrift  financial  report.  Based on assets at December 31, 1999, the
Company is required to pay a semi-annual assessment of approximately $14,100.

         Community  Reinvestment  and Fair  Lending  Laws.  Under the  Community
Reinvestment  Act (the "CRA"),  as  implemented  by OTS  regulations,  a savings
institution  has a continuing and  affirmative  obligation,  consistent with its
safe and sound operation, to help meet the credit needs of its entire community,
including low and moderate income neighborhoods.  In addition,  the Equal Credit
Opportunity Act and the Fair Housing Act prohibit lenders

                                       20
<PAGE>
from discriminating in
their  lending  practices  on the basis of  characteristics  specified  in those
statutes and authorizes OTS enforcement actions for violations. The CRA does not
establish specific lending requirements or programs for financial  institutions,
nor does it limit an  institution's  discretion to develop the types of products
and  services  that it  believes  are best suited to its  particular  community,
consistent  with the CRA.  The CRA  requires  the OTS,  in  connection  with its
examination  of a savings  institution,  to assess the  institution's  record of
meeting the credit needs of its  community  and to take such record into account
in its evaluation of certain  applications by such  institution.  The CRA rating
system  identifies four levels of performance that may describe an institution's
record of meeting community needs: outstanding,  satisfactory,  needs to improve
and substantial  non-compliance.  The CRA also requires all institutions to make
public disclosure of their CRA ratings.  The OTS assesses the CRA performance of
a savings institution under lending,  service and investment tests, and based on
such  assessment,  assigns an  institution  in one of the four  above-referenced
ratings.  The Company received a "satisfactory" CRA rating under the current CRA
regulations in its most recent federal examination by the OTS.

         Transactions with Related Parties. The Company's authority to engage in
transactions  with  related  parties or  "affiliates"  (i.e.,  any company  that
controls or is under common control with an  institution,  including the Holding
Company  and its  non-savings  institution  subsidiaries)  or to make  loans  to
certain insiders,  is limited by Sections 23A and 23B of the Federal Reserve Act
("FRA").  Section  23A  limits the  aggregate  amount of  transactions  with any
individual  affiliate  to  10%  of  the  capital  and  surplus  of  the  savings
institution  and also  limits  the  aggregate  amount of  transactions  with all
affiliates  to 20% of the savings  institution's  capital and  surplus.  Certain
transactions  with  affiliates  are required to be secured by  collateral  in an
amount and of a type  described  in Section 23A and the  purchase of low quality
assets from  affiliates  is  generally  prohibited.  Section 23B  provides  that
certain transactions with affiliates,  including loans and asset purchases, must
be on terms  and  under  circumstances,  including  credit  standards,  that are
substantially  the same or at least as  favorable  to the  institution  as those
prevailing  at  the  time  for  comparable   transactions  with   non-affiliated
companies. In addition,  savings institutions are prohibited from lending to any
affiliate  that is  engaged  in  activities  that are not  permissible  for bank
holding companies and no savings  institution may purchase the securities of any
affiliate other than a subsidiary.

         The  Company's  authority  to  extend  credit  to  executive  officers,
directors and 10% stockholders,  as well as entities controlled by such persons,
is currently  governed by Sections  22(g) and 22(h) of the FRA, and Regulation O
thereunder.  Among other things, these regulations require such loans to be made
on terms substantially the same as those offered to unaffiliated individuals and
do not involve more than the normal risk of repayment.  Regulation O also places
individual  and aggregate  limits on the amount of loans the Company may make to
such persons based,  in part, on the Company's  capital  position,  and requires
certain  approval  procedures to be followed.  At December 31, 1999, the Company
was in compliance with the regulations.

         Enforcement.  Under  the  FDI  Act,  the OTS  has  primary  enforcement
responsibility  over  savings  institutions  and  has  the  authority  to  bring
enforcement  action  against  all   "institution-related   parties,"   including
stockholders,  and any attorneys,  appraisers and  accountants  who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution.  Formal enforcement action may range from the issuance of a
capital  directive  or cease and  desist  order to removal  of  officers  and/or
directors of the institutions, receivership, conservator ship or the termination
of deposit  insurance.  Civil  penalties  cover a wide range of  violations  and

<PAGE>

actions, and range up to $25,000 per day, unless a finding of reckless disregard
is made, in which case penalties may be as high as $1 million per day.  Criminal
penalties  for  most  financial  institution  crimes  include  fines of up to $1
million and imprisonment for up to 30 years. Under the FDI Act, the FDIC has the
authority to recommend to the Director of OTS that  enforcement  action be taken
with respect to a particular savings institution.  If action is not taken by the
Director,   the  FDIC  has   authority  to  take  such  action   under   certain
circumstances.

         The federal banking  agencies  recently  adopted a final regulation and
Interagency   Guidelines   Prescribing   Standards   for  Safety  and  Soundness
("Guidelines")  to implement the safety and soundness  standards  required under
the FDI Act. The  Guidelines  set forth the safety and soundness  standards that
the federal  banking  agencies use to identify  and address  problems at insured
depository institutions before capital becomes impaired. The standards set forth
in the Guidelines  address internal controls and information  systems;  internal
audit  system;  credit  underwriting;  loan  documentation;  interest  rate risk
exposure;  asset growth; and compensation,  fees and benefits. The agencies also
adopted a proposed  rule which  proposes  asset  quality and earnings  standards
which, if adopted, would be added to the Guidelines.  If the appropriate federal
banking  agency  determines  that an  institution  fails  to meet  any  standard
prescribed by

                                       21
<PAGE>
the  Guidelines,  the agency may require the institution to submit
to the agency an acceptable  plan to achieve  compliance  with the standard,  as
required  by the FDI Act.  The final  regulations  establish  deadlines  for the
submission and review of such safety and soundness compliance plans.

         Capital  Requirements.  The capital regulations of the Office of Thrift
Supervision (OTS) require  institutions to have a minimum 3 percent core capital
ratio; and a minimum 8 percent 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 met the regulatory capital requirements at December 31,
1999 and 1998.

         The risk-based capital standard for savings  institutions  requires the
maintenance of total capital (which is defined as core capital and supplementary
capital)  to   risk-weighted   assets  of  8%.  In  determining  the  amount  of
risk-weighted  assets, all assets,  including certain  off-balance sheet assets,
are  multiplied by a  risk-weight  of 0% to 100%, as assigned by the OTS capital
regulation  based on the risks OTS  believes  are inherent in the type of asset.
The components of core capital are equivalent to those  discussed  earlier under
the 3% leverage  standard.  The components of  supplementary  capital  currently
include  cumulative  preferred  stock,   long-term  perpetual  preferred  stock,
mandatory convertible  securities,  subordinated debt and intermediate preferred
stock and,  within  specified  limits,  the allowance for loan and lease losses.
Overall,  the amount of supplementary  capital included as part of total capital
cannot exceed 100% of core capital.

         The OTS has  incorporated  an  interest  rate risk  component  into its
regulatory  capital  rule.  The final  interest  rate risk rule also adjusts the
risk-weighting  for  certain  mortgage  derivative  securities.  Under the rule,
savings  associations  with "above normal"  interest rate risk exposure would be
subject to a deduction  from total  capital for  purposes of  calculating  their
risk-based capital requirements.  A savings association's  interest rate risk is
measured  by the decline in the net  portfolio  value of its assets  (i.e.,  the
difference  between  incoming  and outgoing  discounted  cash flows from assets,
liabilities and off-balance  sheet contracts) that would result from a 200-basis
point  increase or decrease in market  interest  rates dividend by the estimated
economic value of the  association's  assets,  as calculated in accordance  with
guidelines set forth by the OTS. A savings  association  whose measured interest
rate  risk  exposure  exceeds  2% must  deduct an  interest  rate  component  in
calculating  its total capital under the  risk-based  capital rule. The interest
rate risk component is an amount equal to one-half of the difference between the
institution's  measured  interest rate risk and 2%,  multiplied by the estimated
economic value of the association's  assets. That dollar amount is deducted from
an  association's  total capital in calculating  compliance  with its risk-based
capital  requirement.  Under  the  rule,  there is a  quarter  lag  between  the
reporting date of an institution's financial data and the effective date for the
new capital requirement based on that data. A savings association with assets of
less than $300  million and  risk-based  capital  ratios in excess of 12% is not
subject  to  the  interest  rate  risk  component,  unless  the  OTS  determines
otherwise.  The rule also  provides  that the  Director  of the OTS may waive or
defer an association's interest rate risk component on a case-by-case basis. The
OTS has  postponed  the  effective  date of the  capital  component  in order to
provide it with an opportunity to review the interest rate risk approaches taken
by the other federal banking agencies.

         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

<PAGE>

defined in implementing  regulations.  Institutions,  such as the Company, which
are defined as well  capitalized,  must generally have a leverage capital (core)
ratio of at least 5 percent,  a tier 1  risk-based  capital  ratio of at least 6
percent, and a total risk-based capital ratio of at least 10 percent. FDICA 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 met the
regulatory capital requirements at December 31, 1999 and 1998.

                                       22
<PAGE>
Regulatory Capital:

         The  following  table sets  forth the  Company's  actual  and  required
capital amounts and ratios as of December 31, 1999.
<TABLE>
<CAPTION>
<S>                                <C>             <C>        <C>           <C>        <C>              <C>
                                                                  For capital         To be well capitalized
                                                                   adequacy           under prompt corrective
                                            Actual                 purposes             action provisions
                                     -------------------      --------------------  -----------------------------
                                     Amount       Percent      Amount      Percent        Amount       Percent
                                     ------       -------      ------      -------        ------       -------

Tangible Capital                   $21,511,000     22.7%      1,420,000     1.5%       $       --         --%
Tier I leverage (core) capital     $21,511,000     22.7       3,786,000     4.0         4,731,000        5.0
Risk based capital                  21,893,000     50.1       3,496,000     8.0         4,370,000       10.0
Tier I risk-based capital           21,511,000     52.4              --      --         2,622,000        6.0
</TABLE>


Federal Home Loan Bank System

         The Company is a member of the Federal  Home Loan Bank  ("FHLB") of Des
Moines,  which is one of the 12  regional  FHLBs.  As a member of the FHLB,  the
Company is required to purchase and maintain  stock in the FHLB of Des Moines in
an  amount  equal  to the  greater  of 1% of its  aggregate  unpaid  residential
mortgage loans, home purchase contracts or similar  obligations at the beginning
of each year, or 1/20th (or such greater fraction as established by the FHLB) of
outstanding FHLB advances. At December 31, 1999 the Company had $613,200 in FHLB
stock, which was in compliance with this requirement.  In past years the Company
has  received  dividends  on its  FHLB  stock.  Over the past  five  years  such
dividends have averaged  6.83%,  and were 6.35% and 6.30% for the year ended and
at December 31, 1999, respectively.  Certain provisions of FIRREA require all 12
Federal Home Loan Banks to provide  financial  assistance  for the resolution of
troubled savings  associations and to contribute to affordable  housing programs
through  direct loans or interest  subsidies on advances  targeted for community
investment and low- and  moderate-income  housing projects.  These contributions
could cause rates on the FHLB  advances to increase and could  affect  adversely
the level of FHLB dividends paid and the value of FHLB stock in the future.


Prompt Corrective Regulatory Action

         Under the OTS Prompt Corrective Action regulations, the OTS is required
to take certain supervisory actions against undercapitalized  institutions,  the
severity  of which  depends  upon the  institution's  degree of  capitalization.
Generally,  a savings institution that has total risk-based capital of less than
8.0% or a leverage  ratio or a Tier 1 core capital  ratio that is less than 4.0%
is considered to be  undercapitalized.  A savings institution that has the total
risk-based  capital less than 6.0%, a Tier 1 core  risk-based  capital  ratio of
less than 3.0% or a leverage  ratio that is less than 3.0% is  considered  to be
"significantly  undercapitalized"  and a savings institution that has a tangible
capital to assets  ratio equal to or less than 2.0% is deemed to be  "critically
undercapitalized."  Subject to a narrow  exception,  the  banking  regulator  is
required  to  appoint a  receiver  or  conservator  for an  institution  that is
"critically  undercapitalized."  The  regulation  also  provides  that a capital
restoration  plan  must be  filed  with  the OTS  within  45 days of the date an
institution  receives  notice  that  it  is  "undercapitalized,"  "significantly

<PAGE>

undercapitalized"  or  "critically   undercapitalized."  In  addition,  numerous
mandatory supervisory actions become immediately  applicable to the institution,
including,  but not limited to, restrictions on growth,  investment  activities,
capital distributions,  and affiliate transactions.  The OTS could also take any
one of a number of discretionary supervisory actions,  including the issuance of
a capital  directive  and the  replacement  of  senior  executive  officers  and
directors.


Federal Reserve System

         The Federal Reserve Board regulations  require savings  institutions to
maintain   non-interest-earning  reserves  against  their  transaction  accounts
(primarily NOW and regular checking accounts). The Company is in compliance with
the  foregoing  requirements.  The  balances  maintained  to  meet  the  reserve
requirements  imposed by the FRB may be used to satisfy  liquidity  requirements
imposed by the OTS.

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

                                       23
<PAGE>
Holding Company Regulation

         General. WCF Financial, M.H.C. which owns the majority of the Company's
common stock  outstanding (the "Holding  Company") is a  non-diversified  mutual
savings and loan holding company within the meaning of the HOLA, as amended.  As
such,  the  Holding  Company  is  registered  with the OTS and is subject to OTS
regulations,  examinations, supervision and reporting requirements. In addition,
the OTS has  enforcement  authority over the Holding Company and its non-savings
institution subsidiaries.  Among other things, this authority permits the OTS to
restrict or prohibit  activities that are determined to be a serious risk to the
subsidiary savings  institution.  The Company must notify the OTS 30 days before
declaring any dividend to the Holding Company.

         As a unitary  savings and loan  holding  company,  the Holding  Company
generally will not be restricted under existing laws as to the types of business
activities in which it may engage,  provided that the Company  continues to be a
QTL.  Upon any  non-supervisory  acquisition  by the Holding  Company of another
savings  association or savings bank that meets the QTL test and is deemed to be
a savings  institution  by the OTS, the Holding  Company would become a multiple
savings and loan  holding  company  (if the  acquired  institution  is held as a
separate subsidiary) and would be subject to extensive  limitations on the types
of business  activities in which it could engage. The HOLA limits the activities
of a multiple  savings and loan holding company and its non-insured  institution
subsidiaries  primarily to  activities  permissible  for bank holding  companies
under  Section  4(c)(8) of the Bank Holding  Company  Act,  subject to the prior
approval of the OTS, and  activities  authorized by OTS  regulation.  The OTS is
prohibited  from  approving  any  acquisition  that  would  result in a multiple
savings and loan holding company controlling  savings  institutions in more than
one state, subject to two exceptions: (i) the approval of interstate supervisory
acquisitions by savings and loan holding companies,  and (ii) the acquisition of
a savings  institution  in another  state if the laws of the state of the target
savings institution specifically permit such acquisitions.

         The HOLA  prohibits a savings  and loan  holding  company,  directly or
indirectly, or through one or more subsidiaries,  from acquiring another savings
institution or holding company  thereof,  without prior written  approval of the
OTS. It also prohibits the acquisition or retention of, with certain exceptions,
more than 5% of a non-subsidiary  savings institution,  a non-subsidiary holding
company,  or a  non-subsidiary  company  engaged in activities  other than those
permitted by the HOLA; or acquiring or retaining  control of an institution that
is not federally  insured.  In evaluating  applications by holding  companies to
acquire savings institutions, the OTS must consider the financial and managerial
resources,  future prospects of the company and institution involved, the effect
of the  acquisition on the risk to the insurance fund, the convenience and needs
of the community and competitive factors.

         Federal law  generally  provides that no "person,"  acting  directly or
indirectly or through or in concert with one or more other persons,  may acquire
"control," as that term is defined in OTS  regulations,  of a  federally-insured
savings  institution  without  giving at least 60 days written notice to the OTS
and providing the OTS an opportunity to disapprove of the proposed  acquisition.
Such acquisitions of control may be disapproved if it is determined, among other
things,  that (i) the acquisition would substantially  lessen competition;  (ii)
the financial  condition of the acquiring  person might jeopardize the financial
stability  of  the  savings  institution  or  prejudice  the  interests  of  its
depositors;  or (iii) the  competency,  experience or integrity of the acquiring
person or the proposed  management  personnel  indicates that it would not be in
the  interest  of the  depositors  or the  public to permit the  acquisition  of
control by such person.

         Restrictions  Applicable  to  Mutual  Holding  Companies.  Pursuant  to
Section  10(o) of the HOLA and OTS  regulations,  a mutual  holding  company may
engage in the  following  activities:  (i)  investing  in the stock of a savings

<PAGE>

association;  (ii)  acquiring  a mutual  association  through the merger of such
association into a savings association  subsidiary of such holding company or an
interim savings  association  subsidiary of such holding company;  (iii) merging
with or  acquiring  another  holding  company;  one of whose  subsidiaries  is a
savings association; (iv) investing in a corporation, the capital stock of which
is available  for purchase by a savings  association  under federal law or under
the law of any state where the subsidiary  savings  association or  associations
share their home offices; (v) furnishing or performing management services for a
savings  association  subsidiary  of such  company;  (vi)  holding,  managing or
liquidating  assets owned or acquired from a savings subsidiary of such company;
(vii) holding or managing  properties used or occupied by a savings  association
subsidiary of such company properties used or occupied by a savings  association
subsidiary of such company;  (viii) acting as trustee under deeds of trust; (ix)
any other  activity  (A) that the Federal  Reserve  Board,  by  regulation,  has
determined to be permissible  for bank holding  companies  under Section 4(c) of
the Bank  Holding  Company  Act of 1956,  unless the  Director,  by  regulation,
prohibits or limits any such activity for

                                       24
<PAGE>
savings and loan holding  companies;  or (B) in which multiple  savings and loan
holding companies were authorized (by regulation) to directly engage on March 5,
1987; and (x) purchasing,  holding, or disposing of stock acquired in connection
with a qualified  stock  issuance if the  purchase of such stock by such savings
and loan  holding  company is  approved  by the  Director.  If a mutual  holding
company  acquires or merges with another  holding  company,  the holding company
acquired or the holding  company  resulting from such merger or acquisition  may
only invest in assets and engage in activities  listed in (i) through (x) above,
and has a period of two years to cease any non-conforming  activities and divest
of any non-conforming
investments.

         Waiver of Dividends.  In addition,  OTS regulations require the Holding
Company,  which owns the majority of the Company's  common stock,  to notify the
OTS of any  proposed  waiver of its right to receive  dividends.  It is the OTS'
recent practice to review dividend waiver notices on a case-by-case  basis, and,
in general,  not object to any such waiver if: (i) the mutual holding  company's
board  of  directors  determines  that  such  waiver  is  consistent  with  such
directors' fiduciary duties to the mutual holding company's members; (ii) for as
long as the subsidiary is controlled by the mutual holding  company,  the dollar
amount of dividends  waived by the mutual  holding  company are  considered as a
restriction on the retained earnings of the subsidiary,  which  restriction,  if
material, is disclosed in the public financial statements of the subsidiary as a
note to the financial statements; (iii) the amount of any dividend waived by the
mutual holding  company is available for declaration as a dividend solely to the
mutual  holding  company,  and, in accordance  with SFAS 5, where the subsidiary
determines  that the payment of such dividend to the mutual  holding  company is
probable,  an  appropriate  dollar  amount is recorded as a liability;  (iv) the
amount  of any  waived  dividend  is  considered  as  having  been  paid  by the
subsidiary  (and  the  subsidiary's  capital  ratios  adjusted  accordingly)  in
evaluating any proposed dividend under OTS capital distribution regulations; and
(v) in the  event  the  mutual  holding  company  converts  to stock  form,  the
appraisal  submitted to the OTS in connection  with the  conversion  application
takes into account the aggregate  amount of the  dividends  waived by the mutual
holding company.

         Conversion of the Mutual Holding Company to Stock Form. OTS regulations
permit  the  Holding  Company  to issue  from the  mutual to the  stock  form of
ownership (a "Conversion Transaction"). There can be no assurance when, if ever,
a Conversion  Transaction  will occur, and the Board of Directors has no current
intention  or  plan to  undertake  a  Conversion  Transaction.  In a  Conversion
Transaction  a new  holding  company  would be  formed as the  successor  to the
Company (the "New Holding Company"),  the Holding Company's  corporate existence
would  end,  and  certain  depositors  of the Bank  would  receive  the right to
subscribe  for  additional  shares of the New Holding  Company.  In a Conversion
Transaction,   each  share  of  Common  Stock  held  by  the  Company's   public
stockholders  ("Minority  Shareholders") would be automatically converted into a
number of shares of common stock of the New Holding Company determined  pursuant
an exchange ratio that ensures that after the Conversion Transaction, subject to
any adjustment to reflect the receipt of cash in lieu of fractional  shares, the
percentage of the to-be outstanding  shares of the New Holding Company issued to
Minority  Stockholders  in exchange for their Common Stock would be equal to the
percentage  of  the  outstanding   shares  of  Common  Stock  held  by  Minority
Stockholders  immediately prior to the Conversion Transaction.  The total number
of shares held by Minority  Shareholders after the Conversion  Transaction would
also be affected by any purchase by such  persons in the offering  that would be
conducted as part of the Conversion Transaction.


Insurance of Accounts and Regulation by the FDIC

         The Company is a member of the SAIF, which is administered by the FDIC.
Deposits are insured up to applicable  limits by the FDIC and such  insurance is

<PAGE>

backed by the full faith and credit of the United States Government. As insurer,
the FDIC  imposes  deposit  insurance  premiums  and is  authorized  to  conduct
examinations of and to require reporting by FDIC-insured  institutions.  It also
may prohibit any FDIC-insured institution from engaging in any activity the FDIC
determines by  regulation or order to pose a serious risk to the FDIC.  The FDIC
also  has  the  authority  to  initiate   enforcement  actions  against  savings
institutions,  after giving the OTS an opportunity to take such action,  and may
terminate  the deposit  insurance  if it  determines  that the  institution  has
engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

         The FDIC's SAIF  deposit  insurance  premiums  are  assessed  through a
risk-based  system under which all insured  depository  institutions  are placed
into one of nine categories and assessed insurance  premiums,  ranging from .23%
to .67%  of  deposits,  based  upon  their  level  of  capital  and  supervisory
evaluation. Under the system, institutions classified as well capitalized (i.e.,
a core  capital  ratio of at least  5%,  a ratio  of Tier 1 or core  capital  to
risk-weighted  assets  ("Tier

                                       25
<PAGE>

1 risk-based capital") of at least 6% and a risk-based capital ratio of at least
10%) and considered  healthy pay the lowest premium while  institutions that are
less than adequately capitalized (i.e., core or Tier 1 risk-based capital ratios
of less than 4% or a risk-based capital ratio of less than 8%) and considered of
substantial  supervisory concern pay the highest premium. Risk classification of
all  insured  institutions  will  be  made  by the  FDIC  for  each  semi-annual
assessment period.

         The FDIC is authorized to increase  assessment  rates,  on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary  by the FDIC.  The Company  anticipates  that its ongoing  annual SAIF
premiums will be approximately $14,500.

                                       26
<PAGE>

                           FEDERAL AND STATE TAXATION

Federal Taxation

         For federal income tax purposes,  the Company and its subsidiaries file
a consolidated  federal income tax return on a calendar year basis.  The Holding
Company is not permitted to file a  consolidated  federal income tax return with
the Company.  Thus,  the Holding  Company  files a separate  federal  income tax
return on a calendar year basis.

         The Holding Company and the Company are subject to the rules of federal
income taxation generally  applicable to corporations under the Internal Revenue
Code of 1986, as amended (the "Code").

         Savings  institutions such as Bank that meet certain definitional tests
relating  to the  composition  of assets  and other  prescribed  by the Code are
permitted to establish reserves for bad debts and to make annual additions which
may,  within  specified  formula  limits,  be taken as a deduction  in computing
taxable  income  for  federal  income tax  purposes.  The amount of the bad debt
reserve deduction is computed under the experience method.

         If a savings  institution  ceases to qualify as a "bank" (as defined in
Code  Section  581) for bad debt  purposes or converts  to a credit  union,  the
pre-1988  reserves and the supplemental  reserves are restored to income ratably
over a six-year  period,  beginning in the tax year the savings  institution  no
longer qualifies as a bank. The pre-1988  reserves are also subject to recapture
in  the  case  of  certain  excess  distributions   including  distributions  on
liquidation and dissolution and redemptions of shareholders.

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

         The Company is accounting for income taxes in accordance  with SFAS No.
109,  "Accounting for Income Taxes." The liability  method accounts for deferred
income  taxes by applying the enacted  statutory  rates in effect at the balance
sheet date to  differences  between the book cost and the tax cost of assets and
liabilities.  The resulting  deferred tax liabilities and assets are adjusted to
reflect changes in tax laws.  SFAS 109 was implemented by the Company  effective
January 1, 1993.

         The Company has not been audited by the Internal Revenue Service or the
State of Iowa within the past five years.

Iowa Taxation

         The Company files an Iowa corporate tax return,  the Bank files an Iowa
franchise tax return,  and the Bank's  subsidiary  files an Iowa corporation tax
return on a calendar year basis. The Holding Company files an Iowa corporate tax
return on a calendar year basis..

         The State of Iowa imposes a tax on the Iowa franchise taxable income of
savings  institutions  at the  rate of 5%.  Iowa  franchise  taxable  income  is
generally  similar to federal taxable income except that interest from state and

<PAGE>

municipal  obligations  is  taxable,  and no  deduction  is  allowed  for  state
franchise taxes.

         The state  corporation  income tax ranges from 6% to 12% depending upon
Iowa corporation taxable income. Interest from federal securities is not taxable
for purposes of the Iowa corporation income tax.

                                       27
<PAGE>



                        EXECUTIVE OFFICERS OF THE COMPANY

         The  following  table sets forth  information  as of December 31, 1999,
with respect to the executive officers of the Company.

Name                    Age     Occupation

Phyllis A. Murphy       49     President and Chief Executive Officer

Stephen L. Mourlam      47     Executive Vice President and Chief Financial
                               Officer

Kyle R. Swon            38     Senior Vice President

Kathie R. Highland      54     Vice President and Secretary



ITEM 2. PROPERTIES

         (a) The Company conducts its business through a single facility located
in Webster City,  Hamilton County,  Iowa. The facility opened and has been owned
by the Company  since  1960.  At December  31,  1999,  the net book value of the
Company's property and equipment was $485,085.

         (b) Investment  Policies.  For a description of the Company's  policies
(all of which may be changed without a vote of the Company's  security  holders)
and the limitations on the percentage of assets which may be invested in any one
investment,  or type of  investment  with  respect to: (1)  investments  in real
estate or interests in real estate;  (2)  investments in real estate  mortgages;
and (3) securities of or interests in persons  primarily  engaged in real estate
activities, reference is made hereunder to the information presented above under
"Item 1. Description of Business."

         (c) Description of Real Estate and Operating Data. Not Applicable;  the
book value of each of the Company's properties is less than 10% of the Company's
total consolidated assets at December 31, 1999.

ITEM 3. LEGAL PROCEEDINGS

         The Company is  periodically  involved in claims and lawsuits  that are
incident to the Company's business. As of December 31, 1999, the Company was not
involved in any material claim or lawsuit.

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

         No matters were  submitted  during the fourth quarter of the year ended
December 31, 1999 to a vote of security holders.

                                     PART II

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


         For information  concerning the market for the Company's  common stock,
the section  captioned  "Stockholder  Information--Stock  Listing"  and "--Price
Range of Common Stock and  Dividends  Paid" of the  Company's  Annual  Report to
Stockholders  for the Year  Ended  December  31,  1999  (the  "Annual  Report to
Stockholders") is incorporated herein by reference.

                                       28
<PAGE>

ITEM 6  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

         The  "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations" section of the Company's Annual Report to Stockholders is
incorporated herein by reference.

ITEM 7. FINANCIAL STATEMENTS

         Pages 13-37 of the  Company's  1999 Annual Report to  Stockholders  are
incorporated herein by reference.

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

         There were no  changes  in or  disagreements  with  accountants  in the
Company's accounting and financial disclosure during 1999.


                                    PART III

ITEM 9. DIRECTORS AND OFFICERS OF THE COMPANY

         Information  concerning Directors of the Company is incorporated herein
by reference from the Company's  definitive Proxy Statement dated March 15, 2000
(the  "Proxy   Statement"),   specifically  the  section   captioned   "Proposal
I--Election of Directors." In addition,  see Item 1. "Executive  Officers of the
Company" for information concerning the Company's executive officers.

ITEM 10. EXECUTIVE COMPENSATION

         Information concerning executive compensation is incorporated herein by
reference  from  the  Company's  Proxy  Statement,   specifically  the  sections
captioned   "Proposal   I--Election   of   Directors--Executive   Compensation,"
"--Directors' Compensation," and "--Benefits."

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT

         Information   concerning  security  ownership  of  certain  owners  and
management  is  incorporated  herein  by  reference  from  the  Company's  Proxy
Statement,  specifically the section captioned "Voting  Securities and Principal
Holders Thereof."

ITEM 12. CERTAIN TRANSACTIONS

         Information  concerning  relationships and transactions is incorporated
herein by reference from page 9 of the Company's Proxy Statement.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                  3.1      Federal Stock Charter of Webster City Federal Bancorp
                           (Incorporated  by  reference  to  Exhibit  3.1 of the
                           Company's Form 8-KSB as filed on July 1, 1999.

                  3.2      Bylaws of Webster City Federal Bancorp  (Incorporated
                           by  reference  to Exhibit 3.2 of the  Company's  Form
                           8-KSB as filed on July 1, 1999.

                                       29
<PAGE>
                  4        Common Stock Certificate of the Company (Incorporated
                           by  reference  to  Exhibit  4 of the  Company's  Form
                           8-KSB, as filed on July 1, 1999.

                  10.1.A   Severance Agreement,  as amended between the Company,
                           the Bank and Phyllis A. Murphy,  President  and Chief
                           Executive Officer.

                  10.1.B   Severance Agreement,  as amended between the Company,
                           the Bank  and  Stephen  L.  Mourlam,  Executive  Vice
                           President.

                  101.C    Severance Agreement,  as amended between the Company,
                           the Bank and Kyle R. Swon, Senior Vice President.

                  13       1999 Annual Report to Stockholders

21       Subsidiaries of the Registrant


(b)      Reports on Form 8-K:
----------------------------

                  The Registrant  filed no Current Report on Form 8-K during the
fourth quarter of 1999.


                                       30
<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       WEBSTER CITY FEDERAL BANCORP


Date:  March 17, 2000                  /s/ Phyllis A. Murphy
                                       -----------------------------------------
                                           Phyllis A. Murphy
                                           President and Chief Executive Officer

         Pursuant to the  requirements of the Securities  Exchange of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.



     /s/ Phyliss A. Murphy                    /s/ Stephen L. Mourlam
     -------------------------------         ------------------------
        Phyllis A. Murphy,                      Stephen L. Moulam
        President, Chief Executive           Executive Vice President
        Officer and Director                (Principal Financial and
       (Principal Executive Officer)         Accounting Officer)


     Date:  March 17, 2000                   Date: March 17, 2000



     /s/ Ellis S. Swon                       /s/ Donald I. Newman
     ------------------------                ----------------------
         Ellis S. Swon,                          Donald I. Newman,
         Chairman of the Board                   Director


     Date:  March 17, 2000                    Date: March 17, 2000


     /s/ Dennis J. Tasler                     /s/ Dr. Carroll E. Haynes
    ----------------------                    --------------------------
         Dennis J. Tasler,                        Dr. Carroll E. Haynes,
         Director                                 Director

     Date:  March 17, 2000                   Date: March 17, 2000


<PAGE>




                                   EXHIBIT 13


                       1999 ANNUAL REPORT TO STOCKHOLDERS