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, 2000

                                       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]
<PAGE>

         The  Registrant's  revenues for year ended  December 31, 2000 were $7.1
million.

         As of February 28, 2001,  there were issued and  outstanding  1,886,251
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  28, 2001,
was $  10,675,640.  (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,
     2000 (Parts II and III).

2.   Proxy Statement for the 2001 Annual Meeting of Stockholders (Part III).

                                       1
<PAGE>
                                     PART I

ITEM 1.  BUSINESS
-----------------

General

         The Registrant,  Webster City Federal Bancorp (the "Company"),  and its
subsidiaries,  Webster City Federal  Savings Bank (the Bank) and Security  Title
and Abstract,  Inc.,  conduct  operations in Webster  City,  Iowa.  Webster City
Federal Bancorp 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  by  operation  of law into one  share of the  Registrant's
common  stock,  and each  stockholder  of the 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. Security Title and Abstract,  Inc. is engaged in the business
of providing  abstracting and title services for properties  located in Hamilton
County,  Iowa.  The Company  purchased the  abstracting  company in September of
2000. At December 31, 2000, the Company had total assets of $95.4 million, total
deposits of $65.1 million, and stockholders' equity of $20.9 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, 2000,  $55.0 million,  or 79.7% of the Company's net
loan portfolio  consisted of one-to four-family  residential  mortgage loans and
$5.3  million,  or 7.7%,  of the  Company's  net  loan  portfolio  consisted  of
multi-family  residential  and other  loans.  The Company also  originates  home
equity  loans,  which  totaled $4.7  million,  or 6.9% of the Company's net loan
portfolio at December 31, 2000.  At December 31, 2000,  consumer and other loans
totaled $5.2 million, or 7.5%, 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 $6.0 million,  or 6.3%, of
total assets at December 31, 2000.

         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 Inc., 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.

         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


                                       2
<PAGE>
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.

         Finally,  competition  is likely to  increase as a result of the recent
enactment of the  Gramm-Leach-Biley  Act of 1999,  which eases  restrictions  on
entry into the financial  services market by insurance  companies and securities
firms. Moreover, to the extent that these changes permit banks, securities firms
and insurance  companies to affiliate,  the financial  services  industry  could
experience  further  consolidation.  This  could  result in a growing  number of
larger  financial  institutions  competing in the Company's  primary market area
that offer a wide  variety of  financial  services  than the  Company  currently
offers. Competition for deposits, for the origination of loans and the provision
of other financial  services may limit the Company's growth and adversely impact
its profitability in the future.

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, 2000, the Company's net loans receivable totaled $69.1 million,  of
which $55.1 million, or 79.7%, were one- to four-family  residential real estate
mortgage loans, $5.3 million,  or 7.7%, were multi-family  residential and other
loans,  $4.8 million or 6.9%, were home equity loans and $5.3 million,  or 7.6%,
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,
2000,  mortgage-backed securities totaled $6.0 million, or 6.3% of total assets.
At December 31, 2000,  52.2% of the Company's  mortgage-backed  securities  were
secured by ARM loans, and 47.8% were secured by fixed-rate  loans. The Company's
policy is to hold mortgage-backed securities to maturity.




                                       3
<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,
                                      ----------------------------------------------------------------------------------------------
                                           2000                1999              1998                 1997               1996
                                      Amount  Percent    Amount   Percent   Amount   Percent    Amount    Percent   Amount   Percent
                                      ------  -------    ------   -------   ------   -------    ------    -------   ------   -------
                                                                         (Dollars in Thousands)
<S>                                  <C>        <C>     <C>         <C>     <C>       <C>      <C>         <C>     <C>        <C>
Real estate loans:
  One- to four-family residential..  $ 55,114   79.76%  $ 50,420    81.07%  $44,047   77.61%   $ 40,119    73.86%  $ 38,875   71.79%
  Home equity .....................     4,750    6.87      4,142     6.66     4,347    7.66       4,286     7.89      3,717    6.31
 Multi-family residential,
      commercial real
      estate and other.............     5,317    7.69      5,248     8.43     5,961   10.50       6,509    11.98      7,798   14.40
                                     --------  ------    -------   ------   -------   ------   --------    ------  --------  ------
    Total real estate loans........    65,181   94.32%    59,810    96.16%   54,355   95.77%     50,914    93.73%    50,390   86.19%

Consumer and other loans:

  Automobile.......................     2,418    3.50%     1,682     2.71%    1,536    2.71%      1,687     3.11%     1,873    3.46%
  Home improvement.................     1,485    2.15      1,083     1.74       963    1.70       1,074     1.98      1,069    1.98
  Loans on savings deposits........       526     .76        248      .39       417     .73         423      .78        582    1.07
  Other............................       770    1.11        587      .94       752    1.33         707     1.30        753    1.39
                                     --------  ------    -------   ------   -------   ------   --------    ------  --------  ------
    Total consumer and other loans.     5,199    7.52%     3,600     5.78%    3,668    6.47%      3,891     7.17%     4,277    7.90%

Real estate sold on contract.......        66    0.10        100     0.16       128    0.23         190     0.35        269    0.50
                                     --------  ------    -------   ------   -------   ------   --------    ------  --------  ------
    Total loans receivable.........    70,446  101.95     63,510   102.10%   58,151  102.47%     54,995   101.37%    54,936  101.45%

Less:
Undisbursed loan proceeds..........  $    928    1.35%   $   922     1.48%  $   999    1.76%   $   2650      .49%  $    393    0.73%
  Premiums on loans purchased......        (3) (0.01)%        (6)  (0.01)%     (11)  (0.02)%        (17)  (0.03)%       (21) (0.04)%

Unearned discount and net
    deferred loan fees.............        14    0.02         20     0.02%       26    0.05%         40      0.07%       52    0.10%
  Allowance for loan losses........       403    0.59%       382     0.61%      385   0.68%         385      0.71%      359    0.66%
                                     --------  ------    -------   ------   -------   ------   --------    ------  --------  ------
    Total loans receivable, net....  $ 69,104  100.00%   $62,192   100.00%  $56,752   100.00%  $ 54,322    100.00% $ 54,153  100.00%
                                     ========  ======    =======   ======   =======   ======   ========    ======  ========  ======

</TABLE>
                                       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, 2000. 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>
                                                                                                     Beyond
                                         Within       1-3         3-5         5-10       10-20         20
                                         1 Year      Years       Years        Years       Years      Years       Total
                                         -------     -------     -------     -------     -------     -------     -------
                                                                          (In Thousands)
<S>                                      <C>         <C>         <C>         <C>         <C>         <C>         <C>
Real estate loans:
  One- to four-family residential        $ 6,562     $11,845     $ 8,270     $ 5,586     $ 8,437     $19,062     $59,762
Multi-family residential, commercial
    real estate and other loans            1,305       2,023         296         772         653         296       5,345
Consumer and other loans                     827       2,258         825         382         781         200       5,273
Real estate sold on contract                  --           1           4          61          --          --          66
                                         -------     -------     -------     -------     -------     -------     -------
    Total loans receivable (gross)         8,694      16,127       9,395       6,801       9,871      19,558      70,446
                                         -------     -------     -------     -------     -------     -------     -------


Mortgage-backed securities (gross)         2,609       1,190         162         657       1,013         350       5,981
                                         -------     -------     -------     -------     -------     -------     -------

    Total loans and
      mortgage-backed securities         $11,303     $17,317     $ 9,557     $ 7,458     $10,884     $19,908     $76,427
                                         =======     =======     =======     =======     =======     =======     =======
</TABLE>


         Fixed-  and  Adjustable-Rate   Loan  and   Mortgage-Backed   Securities
Schedule. The following table sets forth at December 31, 2000, the dollar amount
of all fixed rate and adjustable rate loans due, and mortgage-backed  securities
that mature, after December 31, 2001.

<TABLE>
<CAPTION>
                                                                        Fixed          Adjustable           Total
                                                                     -----------       ----------        -----------
                                                                                     (In Thousands)
<S>                                                                   <C>               <C>              <C>
Real estate loans:
  One- to four-family residential.............................        $  36,616         $  16,584        $  53,200
  Multi-family residential, commercial
    real estate and other.....................................            1,887             2,153            4,040
Consumer and other loans......................................            4,446                 0            4,446
Real estate sold on contract..................................               66               --                66
                                                                      ---------         --------         ---------
    Total loans receivable (gross)............................        $  43,015         $  18,740        $  61,752
                                                                      =========         =========        =========

Mortgage-backed securities (gross)............................        $   2,739         $    633         $   3,372
                                                                      =========         ========         =========

</TABLE>

         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.  The  Company  has  purchased  one-  to  four-family  mortgage  loans
collateralized  by properties in Texas and Colorado.  At December 31, 2000,  the
Company had an aggregate principal balance of $5.6 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

                                       5
<PAGE>

that  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
2000,  ARM loan  originations  decreased as a percentage of total  mortgage loan
originations,  due to a higher  demand for  longer  term fixed rate loans in the
generally lower market interest rate  environment.  For the years ended December
31, 2000 and  December 31, 1999,  the Company  originated  $1.5 million and $3.9
million of ARM loans,  respectively,  which represented 11.9% and 19.1% 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 95%; however, for one- to four-family real estate
loans with loan-to-value ratios of between 80% and 95%, the Company requires the
first 25% 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
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,  2000,  the Company had a total of 45 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, 2000, the Company's  multi-family  and commercial  real
estate  loans had an average  principal  balance  of  $118,800  and the  largest
multi-family or commercial real estate loan had a principal balance of $459,800.
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.

                                       6
<PAGE>
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 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.
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, 2000 was $5.6
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, 2000, home equity and
home  improvement  loans totaled $6.2 million,  or 9.0%, 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 72 months.  The Company's
automobile loans have fixed interest rates and have  loan-to-value  ratios of up
to 85%.  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
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, 2000,
the Company had outstanding loan  commitments of $198,700.  This amount does not
include $928,200 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
                                                            ----------------------
                                                       2000          1999           1998
                                                     --------      --------      --------
                                                               (In Thousands)
<S>                                                  <C>           <C>           <C>
Total loans receivable at beginning of year          $ 62,192      $ 56,752      $ 54,322
  Loans purchased:
  Real estate:
    Total loans purchased                                 450            --            --
                                                     --------      --------      --------
Loans originated:
  Real estate                                          12,440        20,576        14,211
  Consumer                                              5,617         2,857         4,578
                                                     --------      --------      --------
     Total loans originated                            18,507        23,433        18,789
                                                     --------      --------      --------
Loans transferred to REO                                                              (74)
Loan repayments                                       (11,607)      (18,007)      (16,299)
Other loan activity (net)                                  12            14            14
                                                     --------      --------      --------
      Total loans receivable at end of year, net     $ 69,104      $ 62,192      $ 56,752
                                                     ========      ========      ========

</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,  2000,  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.

         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>
                                                 Year Ended December 31,
                                           ------------------------------------
                                              2000         1999          1998
                                           --------      --------      --------
                                                      (In Thousands)
<S>                                        <C>           <C>           <C>
Mortgage-backed securities
  at beginning of year:                    $  7,805      $  9,987      $ 14,923
      Purchases                                  --         1,070            --

     Repayments                              (1,766)       (3,226)       (4,906)
     Discount (premium) amortization            (14)          (26)          (30)
                                           --------      --------      --------
 Mortgage-backed securities
  at end of year, net                      $  6,025      $  7,805      $  9,987
                                           ========      ========      ========

</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>
                                                   At December 31,
                                -------------------------------------------------------
                                        2000            1999                    1998
                                --------------     ---------------    ------------------
                                 $         %        $         %         $          %
                                               (Dollars in Thousands)
<S>                             <C>        <C>     <C>        <C>     <C>           <C>
Mortgage-backed securities:
  Adjustable                    $3,146     52.2%   $4,696     60.2%   $5,294        53.0%
  Fixed                          2,879     47.8     3,109     39.8     4,693        47.0
                                ------    -----    ------    -----    ------       -----
    Total mortgage-backed
      securities, net           $6,025    100.0%   $7,805    100.0    $9,987       100.0%
                                ======    =====    ======    =====    ======       =====
</TABLE>


         At December 31, 2000,  mortgage-backed securities totaled $6.0 million,
or 6.3%,  of total  assets.  ARM  loans  collateralized  52.2% of the  Company's
mortgage-backed  securities portfolio, and fixed-rate loans collateralized 47.8%
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, 2000,  all the Company's  mortgage-backed  securities
were  classified  as "held to  maturity."  At December 31, 2000,  the  Company's
mortgage-backed securities portfolio had a fair value of $6.0 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
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, 2000,  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

                                       9
<PAGE>

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 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, 2000, 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,
                                                   ------------------------------------------------------
                                                     2000         1999       1998        1997        1996
                                                   -------       -----       ----       ------       ----
                                                                     (Dollars in Thousands)
<S>                                                <C>           <C>         <C>        <C>          <C>
Delinquent loans:
  One- to four-family residential real estate      $   195       $  --       $ --       $   --       $ 22
  All other real estate                                 --          --         --           --         --
  Consumer loans, other                                 --           6         15           --          4
                                                   -------       -----       ----       ------       ----
    Total delinquent loans                             195           6         15           --         26
Total real estate owned (1)                             --          --         22           59        101
                                                   -------       -----       ----       ------       ----

      Total non-performing assets                  $   195      $    6       $ 37      $    59       $127
                                                   =======       =====       ====       ======       ====

Total loans delinquent 90 days or more
  to net loans receivable                             0.29%       0.01%   0.03%           0.00%   0.05%
Total loans delinquent 90 days or more
  to total assets                                     0.20%       0.01%   0.02%           0.00%   0.03%
Total non-performing loans and REO
  to total assets                                     0.20%       0.01%   0.04%           0.06%   0.14%
</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,
                                                           -------------------------------------------------------
                                                            2000        1999        1998        1997         1996
                                                           ------      ------      ------      ------       ------
                                                                               (In Thousands)
<S>                                                       <C>         <C>          <C>         <C>          <C>
Loans past due 30-89 days:
  One- to four-family residential....................     $  588      $  445       $   521     $   632      $  613
  All other mortgages................................         --          --            --          20          62
 Consumer, other...................................          208          60            94          63          74
                                                          ------      ------       -------     -------      ------
    Total past due 30-89 days........................     $  796      $  505       $   615     $   715      $  749
                                                          ======      ======       =======     =======      ======

</TABLE>

         The  following  table  sets  forth  information  with  respect  to  the
Company's delinquent loans and other problem assets at December 31, 2000.

<TABLE>
<CAPTION>
                                                                 At December 31, 2000
                                                                -----------------------
                                                                Balance          Number
                                                                -------          ------
                                                                (Dollars in Thousands)
<S>                                                               <C>               <C>
Residential real estate:
  Loans 30 to 89 days delinquent                                  $588              21
  Loans 90 days or more delinquent                                 195               5
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)                        208              43
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                       66               5

</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
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, 2000,
the Company had no special  mention loans,  $646,900  substandard  assets and no
doubtful assets.


                                       11
<PAGE>
         The following  table sets forth the  aggregate  amount of the Company's
classified assets for the years indicated.

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                  ------------------------------
                                                  2000        1999         1998
                                                  ----         ----         ----
                                                         (In Thousands)
<S>                                               <C>          <C>          <C>
Substandard assets                                $647         $564         $437
Doubtful assets                                     --            3           --
Loss assets                                         --           --            2
                                                  ----         ----         ----
     Total classified assets                      $647         $567         $439
                                                  ====         ====         ====
</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, 2000, 1999 and 1998,
the Company  added $ 0, $ 0, and $0,  respectively,  to the  provision  for loan
losses. The Company's allowance for loan losses totaled $403,000,  $382,000, and
$385,000 at December 31, 2000, 1999, and 1998, 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>
                                                                  Year  Ended  December 31,
                                               ---------------------------------------------------------------
                                                2000          1999          1998          1997          1996
                                               -------       -------      -------       -------       -------
                                                                    (Dollars in Thousands)
<S>                                            <C>           <C>          <C>           <C>           <C>
Net loans outstanding                          $69,104       $62,192      $56,572       $54,322       $54,153
Average net loans outstanding                   66,222        58,312       55,704        54,058        53,536
                                               =======       =======      =======       =======       =======

Allowance balances (at beginning of year)          382           385          385           359           446
Provision for losses                                 0             0            0                      40 125
Charge-offs                                          2             9            1            15           228
Recoveries                                          23             6            1             1            16
                                               -------       -------      -------       -------       -------

Allowance balance (at end of year)             $   403       $   382      $   385       $   385       $   359
                                               =======       =======      =======       =======       =======

Allowance for loan losses as a percent
of net loans receivable at end of year            0.59%       0. 61%         0.68%         0.71%         0.67%
Net loans charged off as a percent
  of average net loans outstanding                0.01%       0. 01%         0.00%         0.03%         0.43%
Ratio of allowance for loan losses
  to total nonperforming loans
  at end of year                                   N/M           N/M          N/M           N/M           N/M
Ratio of allowance for loan losses
  to total nonperforming loans and REO
  at end of year                                   N/M           N/M          N/M        652.54%       281.81%

</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, 2000,  no
investment  securities  were  scheduled  to  mature  in one year or less,  $10.5
million,  or 88.2%, were scheduled to mature in from one to five years, and $1.4
million or 11.8% were 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>
                                                             Year Ended December 31,
                                                         ---------------------------------
                                                          2000          1999         1998
                                                         -------      -------      -------
                                                                  (In Thousands)
<S>                                                      <C>          <C>          <C>
Investment portfolio:
  U.S. Government and agency obligations                 $11,886      $14,916      $ 9,899
  Interest-earning deposits in other institutions .        5,816        6,824       15,171
  FHLB stock                                                 613          613          613
                                                         -------      -------      -------
    Total investments                                    $18,315      $22,353      $25,683
                                                         =======      =======      =======

</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, 2000

<TABLE>
<CAPTION>
                                                                  At December 31, 2000
                             ------------------------------------------------------------------------------------------------------
                               One Year or Less      One to Five Years    Five to Ten Years  More than Ten Years           Total
                             --------------------- --------------------- ------------------- ------------------- ------------------
                                        Annualized            Annualized          Annualized         Annualized          Annualized
                                         Weighted              Weighted            Weighted            Weighted            Weighted
                             Carrying    Average   Carrying    Average   Carrying   Average  Carrying  Average   Carrying   Average
                               Value      Yield      Value      Yield      Value      Yield     Value   Yield      Value     Yield
                                                                  (Dollars in Thousands)
<S>                          <C>          <C>       <C>          <C>     <C>          <C>     <C>        <C>      <C>          <C>
Investment portfolio:
   Investment securities,
    U.S. Government          $    --        --%     $10,475      5.84%   $ 1,411      6.12%   $    --    --%      $11,886      5.88%
 FHLB stock                      613      7.14           --        --         --        --         --    --           613      7.14
  Interest-earning deposits
    in other institutions      5,816      5.55           --        --         --        --         --    --         5,816      5.55
                             -------                -------              -------              -------             -------
      Total                  $ 6,429      5.71%     $10,475      5.84%   $ 1,411      6.12%   $    --    --%      $18,315      5.82%
                             =======                =======              =======              =======             =======

</TABLE>


                                       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 $800,000 in
such funds at December 31, 2000.

         Deposit Portfolio. Savings in the Company as of December 31, 2000, were
represented by the various types of deposit programs described below.

<TABLE>
<CAPTION>


  Weighted                                                                                             Percentage
   Average                                                                                              of Total
Interest Rate        Minimum Term        Checking and Savings Deposits       Amount       Balances      Deposits
-------------        ------------        -----------------------------       ------       --------      --------
                                                                                       (In Thousands)
<S>                                                                        <C>            <C>               <C>
   0.00%                 None             Noninterest-bearing checking     $     --       $    760          1.17%
   1.75                  None             NOW accounts                           --          7,979         12.25
   2.51                  None             Passbook                               --          4,319          6.63
   3.29                  None             Money market accounts               1,000          6,023          9.25

                                          Certificates of Deposit
                                          -----------------------

   4.10%                3 months          Fixed term, fixed rate           $  1,000       $    265           .41%
   4.55                 6 months          Fixed term, fixed rate              1,000          1,539          2.36
   5.24                 9 months          Fixed term, fixed rate              1,000          5,818          8.93
   4.42                12 months          Fixed term, fixed rate              1,000          4,459          6.84
   5.80                15 months          Fixed term, fixed rate              1,000         10,267         15.76
   4.38                18 months          Fixed term, fixed rate              1,000          1,563          2.40
   4.78                24 months          Fixed term, fixed rate              1,000         13,248         20.33
   5.27                30 months          Fixed term, fixed rate              1,000          1,331          2.04
   5.18                36 months          Fixed term, fixed rate              1,000          2,117          3.25
   5.17                48 months          Fixed term, fixed rate              1,000            594           .91
   5.99             Over 48 months        Fixed term, fixed rate              1,000          4,864          7.47
                                                                                          -----------     ---------

                                                                                         $  65,146        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>
                                                                        At December 31,
                             ----------------------------------------------------------------------------------------------------
                                            2000                              1999                             1998
                            ---------------------------------  --------------------------------   -------------------------------
                            Balance     Percent(1)  Change(2)  Balance     Percent(1)  Change(2)  Balance    Percent(1)  Change(2)
                                                                          (In Thousands)
<S>                          <C>            <C>     <C>            <C>        <C>     <C>        <C>            <C>      <C>
Noninterest-bearing
  demand                     $   760        1.32%   $  (138)       898        1.32%   $   586    $   312        0.45%    $  (392)
NOW accounts                   7,979       10.02      1,171      6,808       10.02        (61)     6,869       10.00         622
Passbooks                      4,319        6.96       (411)     4,730        6.96        240      4,490        6.54         223
Money market accounts          6,023        8.89        (13)     6,036        8.89        140      5,896        8.58         466
Time deposits that mature:
  within 12 months            26,865       51.41     (8,052)    34,917       51.41      3,562     31,355       45.64      (2,277)
  within 12-36 months         17,486       20.01      3,899     13,587       20.01     (4,348)    17,935       26.10         121
  beyond 36 months             1,714        1.39        772        942        1.39       (905)     1,847        2.69      (1,586)
                             -------      ------    -------    -------      ------    -------    -------      ------     -------
     Total                   $65,146      100.00%   $(2,772)   $67,918      100.00%   $  (786)   $68,704      100.00%    $(2,823)
                             =======      ======    =======    =======      ======    =======    =======      ======     =======

<CAPTION>
                                            At December 31,
                            ------------------------------------------
                                         1997                    1996
                            ---------------------------------  -------
                            Balance    Percent(1)   Change(2)  Balance
                            -------    ----------   ---------  -------
<S>                          <C>        <C>            <C>     <C>
Noninterest-bearing
  demand                    $   704        0.98%   $    20    $   684
NOW accounts                  6,247        8.73        915      5,332
Passbooks                     4,267        5.97       (310)     4,577
Money market accounts         5,430        7.59       (109)     5,539
Time deposits that mature:
  within 12 months           33,632       47.02       (838)    34,470
  within 12-36 months        17,814       24.91     (1,319)    19,133
  beyond 36 months            3,433        4.80      2,216      1,217
                            -------      ------    -------    -------
     Total                  $71,527      100.00%   $   575    $70,952
                            =======      ======    =======    =======

</TABLE>
------------------------------
(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:

<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                                              ----------------------------------------------------
                                                                2000                  1999                  1998
                                                              ---------             --------             ---------
                                                                                 (In Thousands)
<S>                                                           <C>                   <C>                  <C>
Rate
----
4.00-5.99%.........................................           $  25,660             $ 44,999             $  45,105
6.00-7.99%.........................................              20,405                4,446                 6,032
                                                              ---------             --------             ---------
                                                                 46,065             $ 49,445             $  51,137
</TABLE>


         Time Deposit Maturities.  The following table sets forth the amount and
maturities of time deposits at December 31, 2000.
<TABLE>
<CAPTION>

                                                   Amount Due
                  -------------------------------------------------------------------------
                  Less Than      1-2        2-3        3-4      4-5      After 5
                  One Year     Years      Years      Years    Years      Years       Total
                  --------     -----      -----      -----    -----      -----       -----
                                                (In Thousands)
<S>               <C>         <C>         <C>        <C>      <C>      <C>         <C>
Rate
----
5.99% or less     $17,120     $ 4,017     $2,809     $816     $898     $    --     $25,660
6.00-7.99%          9,745      10,618         42       --       --          --      20,405
                  -------     -------     ------     ----     ----     -------     -------

                  $26,865     $14,635     $2,851     $816     $898     $    --     $46,065
                  =======     =======     ======     ====     ====     =======     =======
</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,  2000.  This amount does not include
checking  and  savings   deposits  of  greater  than  $100,000,   which  totaled
approximately $3.4 million at December 31, 2000.

                                                               Certificates
         Maturity Period                                        of Deposit
                                                              (In Thousands)

         Three months or less.........................           $ 1,112
         Three through six months.....................             1,046
         Six through twelve months....................             1,072
         Over twelve months...........................             2,571
                                                                 -------
              Total...................................           $ 5,801
                                                                 =======



         Change in Deposits.  The  following  table sets forth  changes in total
deposits of the Company for the periods indicated:

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                         ---------------------------------------
                                             2000          1999            1998
                                          ---------      ---------      ---------
                                                      (In Thousands)
<S>                                       <C>            <C>
Deposits                                  $ 143,551      $117,534$        115,309
Withdrawals                                 148,031        119,630        119,228
                                          ---------      ---------      ---------
Net decrease before interest credited        (4,480)        (2,096)        (3,919)
Interest credited                             1,249          1,310          1,096
                                          ---------      ---------      ---------

  Net (decrease) increase in deposits     $  (3,231)     $    (786)     $   2,823
                                          =========      =========      =========

</TABLE>
                                       17
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, 2000, the Company had $8.2 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`
<TABLE>
<CAPTION>

                                                         Year Ended December 31,
                                                         --------------------------
                 .
                                                        2000       1999       1998
                                                        ----       ----       ----
<S>                                                     <C>        <C>        <C>
Weighted average rate paid on FHLB advance              5.76%      5.26%      4.79%
Rate paid on ESOP Borrowings                            0.00%      6.75%      6.75%


<CAPTION>


                                              During the Year Ended December 31,
                                              ----------------------------------
                                                2000         1999         1998
                                               ------       ------       ------
                                                   (Dollars in Thousands)
<S>                                            <C>          <C>          <C>
Maximum amount of FHLB Advance
   outstanding at any month                    $8,200       $3,200       $1,200

Approximate average FHLB advance
  outstanding                                   4,908        1,533        1,200

Approximate weighted average rate
  paid on FHLB advance                           5.76%        5.26%        4.79%

Approximate average ESOP borrowing
  outstanding                                       0           75          201

Approximate weighted average rate
 Paid on ESOP borrowing                          0.00%        6.75%        6.75%

</TABLE>
                                       18
<PAGE>
Employees

            As of  December  31,  2000,  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.



                           REGULATION AND SUPERVISION

         As a federally chartered SAIF-insured savings association,  the Bank is
subject to examination,  supervision and extensive regulation by the OTS and the
FDIC. The Bank 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 Bank 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 Bank and prepares reports for the consideration of
the Bank's  Board of  Directors  on any  deficiencies  that they may find in the
Bank's  operations.  The  FDIC  also  examines  the  Bank  in  its  role  as the
administrator  of the SAIF.  The Bank'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  Bank's  mortgage  documents.  Any  changes  in such  regulation,
whether by the FDIC,  OTS or Congress,  could have a material  adverse impact on
the Company and the Bank and their operations.

         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 Bank.


Federal Regulation of Savings Institutions

         Impact of the  Gramm-Leach-Bliley  Act The  Gramm-Leach-Bliley Act (the
"GLB Act"),  establishes a comprehensive  framework to permit affiliations among
commercial  banks,  insurance  companies  and  securities  firms.  The  GLB  Act
restricts  the  powers  of new  unitary  savings  and loan  association  holding
companies.  Unitary  savings and loan  holding  companies  in  existence or with
applications  filed with the OTS on or before May 4, 1999,  such as the Company,
retain their  authority  under the prior law. All other unitary savings and loan
holding companies are limited to financially related activities  permissible for
bank holding companies, as defined under the GLB Act. The GLB Act also prohibits
non-financial  companies from acquiring  grandfathered  unitary savings and loan
association holding companies.

         The  Company  does not  believe  that the GLB Act will have a  material
adverse affect upon its operations in the near term.  However, to the extent the
GLB Act permits banks,  securities  firms and insurance  companies to affiliate,
the financial services industry may experience further consolidation. This could
result in a growing number of larger financial  institutions  that offer a wider
variety of financial  services  than the Company  currently  offers and that can
aggressively compete in the markets the Company currently serves.

         Business  Activities.   The  activities  of  savings  institutions  are
governed  by  federal  law.  The  federal  banking  statutes  (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.

         Loans to One Borrower.  Under  federal law,  savings  institutions  are
generally  subject to the  national  bank  limits on loans to one  borrower or a
related  group  of  borrowers.  Generally,  this  limit  is 15%  of  the  Bank's
unimpaired  capital and surplus on an unsecured basis. An additional  amount may
be lent, equal to 10% of unimpaired capital


                                       19
<PAGE>
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 Bank's  maximum  loans-to-one-borrower  limit was $1.5
million  at  December  31,  2000.  As of  December  31,  2000,  the  Bank was in
compliance with its loans-to-one-borrower limitations.

         Qualified Thrift Lender Test. Federal law 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)
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. As of December 31, 2000, the Bank maintained
90.8% of its portfolio  assets in qualified thrift  investments and,  therefore,
met the QTL test.

         Capital Distributions.  OTS regulations govern capital distributions by
federal savings banks, which include cash dividends, stock repurchases and other
transactions  charged to the capital  account of a savings  bank. A savings bank
must file an application  for OTS approval of a capital  distribution  if either
(1) the total capital  distributions for the applicable calendar year exceed the
sum of the  savings  bank's  net  income  for that year to date plus the  bank's
retained net income for the preceding two years,  (2) the savings bank would not
be  at  least  adequately  capitalized  following  the  distribution,   (3)  the
distribution  would  violate any  applicable  statue,  regulation,  agreement or
OTS-imposed  condition,  or (4) the savings bank is not  eligible for  expedited
treatment of its filings. If an application is not required to be filed, savings
bank which are a  subsidiary  of a holding  company,  as well as  certain  other
savings bank,  must still file a notice with the OTS at least 30 days before the
board of directors declares a dividend or approves a capital  distribution.  The
Bank has declared and paid dividends of $638,000  during the year ended December
31, 2000.

         Liquidity. The Bank is required to maintain an average daily balance of
specified  liquid assets 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%. The Bank's average
liquidity ratio for December 2000 was 24.9%,  which exceeded the then applicable
requirements.  The Bank 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, 2000, the
Bank was required to pay a semi-annual assessment of approximately $14,800.

         Community Reinvestment Act and Fair Lending Laws. Federal savings banks
have  a  responsibility  under  the  Community   Reinvestment  Act  and  related
regulations of the Office of Thrift Supervision to help meet the credit needs of
their communities, including low-and moderate-income neighborhoods. In addition,
the Equal Credit  Opportunity Act and the Fair Housing Act prohibit lenders from
discriminating  in their  lending  practices  on the  basis  of  characteristics
specified  in those  statutes.  An  institution's  failure  to  comply  with the
provisions  of the Community  Reinvestment  Act could,  at a minimum,  result in
regulatory restrictions on its activities,  and failure to comply with the Equal
Credit  Opportunity  Act and the Fair  Housing Act could  result in  enforcement
actions by the Office of Thrift Supervision, as well as other federal regulatory
agencies  and the  Department  of  Justice.  The Bank  received  a  satisfactory
Community  Reinvestment Act rating under the current Community  Reinvestment Act
regulations  in its most  recent  federal  examination  by the  Office of Thrift
Supervision.

           Transactions with Related Parties.  The Bank's authority to engage in
transactions  with related  parties or  "affiliates" 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


                                       20
<PAGE>
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 Bank'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 Bank may make to such
persons based,  in part, on the Bank's capital  position,  and requires  certain
approval  procedures  to be  followed.  At December  31,  2000,  the Bank was in
compliance with the regulations.

         Enforcement.  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 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.  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.

         Standards  for Safety  and  Soundness.  The  federal  banking  agencies
recently  adopted  final  regulations  that 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  address  internal  controls and information  systems;  internal audit
system;  credit underwriting;  loan documentation;  interest rate risk exposure;
asset growth; and compensation,  fees and benefits.  If the appropriate  federal
banking  agency  determines  that an  institution  fails  to meet  any  standard
prescribed by the  Guidelines,  the agency may require the institution to submit
to the agency an acceptable plan to achieve  compliance  with the standard.  The
regulations establish deadlines for the submission and review of such safety and
soundness compliance plans.

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

          The risk-based capital standards for federal savings banks require the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and  supplementary  capital)  to  risk-weighted  assets  of at  least  4% and 8%
respectively.  In  determining  the amount of  risk-weighted  assets,  including
certain off-balance sheet assets, are multiplied by a risk-weighted factor of 0%
to 100%,  assigned by the Office of Thrift Supervision  capital regulation based
on the risks  believed  inherent in the type of asset.  Core (tier 1) capital is
defined as common  stockholders'  equity (including retained earnings),  certain
non-cumulative  perpetual  preferred  stock and  related  surplus  and  minority
interests  in equity  accounts of  consolidated  subsidiaries,  less in tangible
assets  other  than   certain   mortgage   servicing   rights  and  credit  card
relationships.   The  components  of  supplementary  capital  currently  include
cumulative  preferred stock,  long-term  perpetual  preferred  stock,  mandatory
convertible securities,  subordinated debt and intermediate preferred stock, the
allowance  for  loan  and  lease  losses  limited  to  a  maximum  of  1.25%  of
risk-weighted  assets,  and up to 45% of unrealized


                                       21

<PAGE>

gains on  available-for-sale  equity  securities with readily  determinable fair
market values.  Overall, the amount of supplementary capital included as part of
total capital may not exceed 100% of core capital.

         The  capital   regulations  also  incorporate  an  interest  rate  risk
component.  Savings institutions with "above normal" interest rate risk exposure
are  subject to a deduction  from  capital for  purposes  of  calculating  their
risk-based  capital  requirements.  For the present  time,  the Office of Thrift
Supervision  has  deferred  implementation  of the  interest  rate risk  capital
charge. At December 31, 2000 the Bank met each of its capital requirements.

         The following  table sets forth the Bank's actual and required  capital
amounts and ratios as of December 31, 2000.
<TABLE>
<CAPTION>
                                                                            For capital             To be well capitalized
                                                                             adequacy               under prompt corrective
                                              Actual                         purposes                 action provisions
                                       -----------------------      -------------------------     -------------------------
                                         Amount        Percent         Amount         Percent        Amount        Percent
                                         ------        -------         ------         -------        ------        -------
<S>                                   <C>                <C>        <C>                 <C>       <C>
Tangible capital                      $ 20,940,000       21.9%      $ 1,432,000         1.5%      $          -          -%
Tier I (core) capital                   20,940,000       21.9         3,817,000         4.0          4,722,000        5.0
Risk based capital                      21,208,000       45.9         3,697,000         8.0          4,622,000       10.0
Tier I risk-based capital               20,940,000       45.3                 -           -          2,773,000        6.0
</TABLE>

Federal Home Loan Bank System

         The Bank 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 Bank
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, 2000 the Bank had $613,200 in FHLB
stock, which was in compliance with this requirement. In past years the Bank has
received  dividends on its FHLB stock.  Over the past five years such  dividends
have averaged 6.77%, and were 6.92% and 7.08% for the year ended and at December
31, 2000, 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."  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    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.

                                       22
<PAGE>
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 Bank 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.

Holding Company Regulation

         General. WCF Financial, M.H.C. which owns the majority of the Company's
common  stock   outstanding   (the  "Holding   Company")  and  the  Company  are
non-diversified mutual savings and loan holding companies.  As such, the Holding
Company  and the  Company  are  registered  with the OTS and are  subject to OTS
regulations,  examinations, supervision and reporting requirements. In addition,
the OTS has  enforcement  authority over the Holding Company and the Company and
their 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 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.

         Federal law prohibits a savings and loan holding company  including the
Holding Company and the 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
federal law; 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
federal law and OTS regulations and policy, a mutual holding company such as the
Holding Company, and a mid-tier holding company,  such as the Company may engage
in  the  following  activities:   (i)  investing  in  the  stock  of  a  savings
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,


                                       23
<PAGE>
prohibits or limits any such activity for 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. 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  convert  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. 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.

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
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  1  risk-based  capital")  of at  least  6%  and a
risk-based  capital ratio of at least 10%) and considered healthy pay the lowest


                                       24
<PAGE>
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 $12,900.

Federal Securities Law

         Shares of the Company's  common stock are registered with the SEC under
Section 12(g) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act").  The Company is also  subject to the proxy  rules,  tender  offer  rules,
insider  trading  restrictions,   annual  and  periodic  reporting,   and  other
requirements of the Exchange Act.

                           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").

         As a result of the enactment of the Small  Business Job  Protection Act
of 1996, all savings banks and savings associations will be able to convert to a
commercial bank charter, diversify their lending, or be merged into a commercial
bank  without  having to  recapture  any of their  pre-1998 tax bad debt reserve
accumulations.  Any post-1987 reserves will be subject to recapture,  regardless
of whether  or not a  particular  thrift  intends to  convert  its  charter,  be
acquired,  or diversify its activities.  The recapture tax on post-1987 reserves
is assessed in equal  installments  over the six year period  beginning in 1996.
However,  if a thrift meets a minimum level of mortgage  lending test (i.e.,  if
the thrift's level of mortgage  lending activity  (re-financing  and home equity
loans do not count) is equal to or exceeds its average mortgage lending activity
for the six years preceding 1996,  adjusted for inflation),  then the thrift may
suspend its tax bad debt  recapture for the 1996 and 1997 tax years.  At June 30
2000, the Bank had a balance of  approximately  $800,000 of bad debt reserves in
retained income that would be recaptured under this legislation.

         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

                                       25
<PAGE>
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
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.

ITEM 2. PROPERTIES
        ----------

         (a) The Company conducts its business through two facilities located in
Webster  City,  Hamilton  County,  Iowa.  Webster City  Federal  Savings Bank is
located at 820 Des Moines Street.  Security Title and Abstract,  Inc, is located
at 730 Second Street.  At December 31, 2000, the net book value of the Company's
property and equipment was $494,800.

         (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, 2000.

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, 2000, 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, 2000 to a vote of security holders.



                                       26
<PAGE>
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,  2000  (the  "Annual  Report to
Stockholders") is incorporated herein by reference.

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  2000 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 2000.

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
         -----------------------------------------------

         Information   concerning   Directors  of  the  Company  and  concerning
compliance  with  Section  16(a)  of the  Securities  Exchange  Act of  1934  is
incorporated  herein by reference from the Company's  definitive Proxy Statement
dated March 15, 2001 (the "Proxy Statement"), specifically the section captioned
"Proposal I--Election of Directors.

               The  following  table sets forth  information  as of December 31,
2000, with respect to the executive officers of the Company.

Name                   Age                Occupation
----                   ---                ----------

Phyllis A. Murphy      50                President and Chief Executive Officer

Stephen L. Mourlam     48                Executive Vice President and
                                         Chief Financial Officer

Kyle R. Swon           39                Senior Vice President


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."


                                       27
<PAGE>
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.

                  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       2000 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 2000.

                                       28
<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 21, 2001                By:  /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.


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

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

     Date:  March 21, 2001                                   Date: March 21, 2001



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

     Date:  March 21, 2001                                   Date: March 21, 2001


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

     Date:  March 21, 2001                                   Date: March 21, 2001


By:  /s/Dr. Leo Moriarty
     -------------------
     Dr. Leo Moriarty, Director

     Date: March 21, 2001

</TABLE>
                                       29