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, 2002
                                       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
Incorporation or Organization)                            Identification Number)

820 DES MOINES STREET, WEBSTER CITY,IOWA                        50595-0638
----------------------------------------                        ----------
(Address of Principal Executive Offices)                        (Zip Code)



                                 (515) 832-3071

               (Registrant's Telephone Number including area code)

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

                                      NONE

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

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

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant  was  required  to file  reports)  and (2) has been  subject  to such
requirements for the past 90 days. YES |X| NO

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

         The  Registrant's  revenues for year ended  December 31, 2002 were $6.7
million.

         As of February 28, 2003,  there were issued and  outstanding  1,888,376
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, 2003,
was $  11,813,436.  (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,
   2002 (Parts II and III).

2. Proxy Statement for the 2003 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 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
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. an Iowa  corporation  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, 2002, the Company had
total  assets  of  $103.5  million,   total  deposits  of  $70.3  million,   and
stockholders' equity of $22.2 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, 2002,  $62.4 million,  or 85.1% of the Company's net
loan portfolio,  consisted of one-to four-family  residential mortgage loans and
$3.9  million,  or 5.3%,  of the  Company's  net  loan  portfolio  consisted  of
multi-family  residential,  commercial real estate and other loans.  The Company
also  originates home equity loans,  which totaled $4.3 million,  or 5.9% of the
Company's  net loan  portfolio  at December  31,  2002.  At December  31,  2002,
consumer and other loans  totaled $3.8  million,  or 5.2%,  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
$2.7 million, or 2.6%, of total assets at December 31, 2002.

         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 greater  financial  and
marketing  resources  available  to them  than  does the  Company.  The  Company
competes  for savings

                                       2
<PAGE>

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 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, 2002, the Company's net loans receivable totaled $73.3 million,  of
which $60.7 million, or 82.8%, were one- to four-family  residential real estate
mortgage loans, $5.7million, or 7.8%, were multi-family residential,  commercial
real estate and other loans,  $4.3 million,  or 5.9%, were home equity loans and
$4.5 million, or 6.0%, 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,
2002,  mortgage-backed securities totaled $2.7 million, or 2.6% of total assets.
At December 31, 2002,  54.2% of the Company's  mortgage-backed  securities  were
secured by ARM loans, and 45.8% 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,
                                  --------------------------------------------------------------------------------------------
                                        2002               2001               2000                 1999                 1998
                                  ----------------   ----------------   ----------------     ----------------     ----------------
                                  Amount   Percent   Amount   Percent   Amount   Percent     Amount   Percent     Amount   Percent
                                  ------   -------   ------   -------   ------   -------     ------   -------     ------   -------
<S>                             <C>         <C>      <C>        <C>      <C>        <C>      <C>         <C>      <C>         <C>

Real estate loans:
  One- to four-family
    residential                 $ 60,677    82.76%   $62,109    82.84%   $55,114    79.76%   $ 50,420    81.07%   $ 44,047    77.61%
  Home equity                      4,347     5.93      4,729     6.35      4,750     6.87       4,142     6.66       4,347     7.66
  Multi-family residential,
    commercial real estate
      and other                    5,680     7.75      4,963     7.19      5,317     7.69       5,248     8.43       5,961    10.50
                                  ------   -------   ------   -------   ------   -------     ------   -------     ------   -------
    Total real estate loans       70,704    96.43%    71,801    96.38%    59,810    94.32%     59,810    96.16%     54,355    95.77%

Consumer and other loans:

  Automobile                       1,994     2.72%     2,362     3.17%     2,418     3.50%      1,682     2.71%      1,536     2.71%
  Home improvement                   768     1.05      1,124     1.51      1,485     2.15       1,083     1.74         963     1.70
  Loans on savings deposits          320      .44        255      .34        526      .76         248       39         417      .73
  Other                              706      .96        720      .97        770     1.11         587       94         752     1.33
                                  ------   -------   ------   -------   ------   -------     ------   -------     ------   -------
    Total consumer and
      other loans                  3,788     5.17%     4,461     5.99%     5,199     7.52%      3,600     5.78%      3,668     6.47%

Real estate sold on
  contract                            53     0.07         62     0.09         66     0.10         100     0.16         128     0.23
                                  ------   -------   ------   -------   ------   -------     ------   -------     ------   -------
    Total loans receivable        74,545   101.67     76,324   102.46%    70,446   101.95%     63,510   102.10%     58,151   102.47%

Less:
Undisbursed loan proceeds       $    822     1.12%   $ 1,449     1.95%   $   928     1.35%       $922     1.48%     $  999     1.76%
  Premiums on loans
    purchased                          _        _         (1)   (0.01)%       (3)   (0.01)%       ( 6)   (0.01)%       (11)  (0.02)%

Unearned discount and net
    deferred loan fees                 _        _          6     0.01%        14     0.02%         20     0.02%         26     0.05%
  Allowance for loan losses          404     0.55%       378     0.51%       403     0.59%        382     0.61%        385     0.68%
                                  ------   -------   ------   -------   ------   -------     ------   -------     ------   -------
    Total loans receivable,
      net                       $ 73,319   100.00%   $74,492   100.00%   $69,104   100.00%   $ 62,192   100.00%    $56,752   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, 2002. 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...........   $6,928    $5,753     $3,542    $7,997    $13,590   $27,214   $65,024
Multi-family residential, commercial
    real estate and other loans.............      969     1,084        268        17     1,503      1,838     5,680
Consumer and other loans....................      676     1,290      1,053       375       354         40     3,788
Real estate sold on contract................      ---       ---        ---        53       ---        ---        53
                                               ------    ------    -------   -------   -------    ------   --------
    Total loans receivable (gross)..........    8,573     8,127      4,863     8,442    15,447     29,092    74,545
                                               ------    ------    -------     -----    ------     ------    ------

Mortgage-backed securities (gross)..........    1,195       320         32       342       613        162     2,665
                                               ------    ------    -------   -------   -------     ------   --------

    Total loans and
      mortgage-backed securities............   $9,768   $ 8,447    $ 4,896   $ 8,731   $16,060    $29,254  $ 77,210
                                               ======   =======     =======  =======   =======    =======  ========

</TABLE>


         FIXED-  AND  ADJUSTABLE-RATE   LOAN  AND   MORTGAGE-BACKED   SECURITIES
SCHEDULE. The following table sets forth at December 31, 2002, the dollar amount
of all fixed rate and adjustable rate loans due, and mortgage-backed  securities
that mature, after December 31, 2003.

<TABLE>
<CAPTION>

                                                                        Fixed          Adjustable           Total
                                                                     -----------       ----------        -----------
                                                                                     (In Thousands)
<S>                                                                   <C>              <C>               <C>
Real estate loans:
  One- to four-family residential.............................        $  46,614         $  11,483        $  58,097
  Multi-family residential, commercial
    real estate and other.....................................            3,808               903            4,711
Consumer and other loans......................................            4,710                --            4,710
Real estate sold on contract..................................               53                --               53
                                                                      ---------          --------         ---------
    Total loans receivable (gross)............................        $  55,185         $  12,386        $  67,571
                                                                      =========         =========        =========

Mortgage-backed securities (gross)............................        $   1,179         $     290       $   1,469
                                                                      =========         ==========       =========

</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, 2002,  the
Company had an aggregate principal balance of $4.0 million in purchased loans.

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

                                       5
<PAGE>

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 certainty. 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
2002,  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, 2002 and  December 31, 2001,  the Company  originated  $2.8 million and $1.1
million of ARM loans,  respectively,  which  represented 16.4% and 5.9% 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 90% 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 90% 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,  2002,  the Company had a total of 44 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, 2002, the Company's  multi-family  and commercial  real
estate  loans had an average  principal  balance  of  $126,500  and the  largest
multi-family or commercial real estate loan had a principal balance of $867,000.
Multi-family  and  commercial  real estate  loans  currently  are  offered  with
adjustable  interest  rates,  although in the past the  Company  has  originated
fixed-rate multi-family and commercial real estate loans. The terms of each loan
are  negotiated on a  case-by-case  basis,  although such loans  typically  have
adjustable interest rates tied to a market index with a 600 basis point lifetime
interest  rate cap,  and amortize  over 15 years.  An  origination  fee 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.

                                       6
<PAGE>



         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, and the aggregate  principal  balance of such multi-family
and commercial real estate loans at December 31, 2002 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, 2002, home equity and
home  improvement  loans totaled $5.1 million,  or 7.0%, 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, 2002,
the Company had outstanding loan  commitments of $272,300.  This amount does not
include $822,500 of the unfunded portion of loans in process.


                                       7
<PAGE>


ORIGINATION,   PURCHASE  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
                                                           ----------------------------------------------------------
                                                                 2002                  2001                  2000
                                                                 ----                  ----                  ----
                                                                                   (In Thousands)

<S>                                                            <C>                   <C>                   <C>
Total loans receivable at beginning of year........            $ 74,492              $ 69,104              $ 62,192
Loans purchased:
  Real estate:
Total loans purchased..............................                  --                    --                   450
                                                              ---------              --------             ---------
Loans originated:
  Real estate......................................              16,783                 21,101               12,440
  Consumer.........................................               5,430                2,116                 5,617
                                                              ---------             ---------            ---------
     Total loans originated........................              22,213               23,217                18,507
                                                              ---------             --------             ---------
Loans transferred to REO...........................               (391)                  (48)                   ___
Loan repayments....................................            (23,012)              (17,789)              (11,607)
Other loan activity (net)..........................                  17                     8                    12
                                                              -------------         --------             ---------
      Total loans receivable at end of year, net...           $  73,319             $ 74,492             $  69,104
                                                              =========             ========             =========

</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

         Apart of the Company's business involves investments in mortgage-backed
securities.   At  December  31,  2002,  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 and
repayments of mortgage-backed securities for the years indicated.

<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                               ----------------------------------------------------
                                                                  2002                 2001                 2000
                                                                  ----                 ----                 ----
                                                                                   (In Thousands)
<S>                                                              <C>                  <C>                  <C>
Mortgage-backed securities
  at beginning of year:............................              $4,205               $6,025               $7,805
      Purchases....................................
      Repayments....................................             (1,509)              (1,807)              (1,766)
     Discount (premium) amortization...............                  (7)                 (13)                 (14)
                                                               ---------             --------              -------
Mortgage-backed securities
  at end of year, net..............................              $2,689               $4,205               $6,025
                                                               =========             ========             ===========

</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,
                                                            -------------------------------------------------
                                                            2002                  2001                2000
                                                            ----                  ----                ----
                                                            $        %            $        %          $        %
                                                           ---      ---          ---      ---        ---      ---
                                                                          (Dollars in Thousands)

<S>                                                       <C>       <C>         <C>       <C>       <C>       <C>
Mortgage-backed securities:
  Adjustable........................................      $ 1,457   54.2%       $ 2,349   55.9%     $ 3,146   52.2%
  Fixed.............................................        1,232   45.8          1,856   44.1        2,879   47.8
                                                         --------   ------   ----------   ----------      --------
Total mortgage-backed
 securities, net...............................          $  2,689   100.0%      $ 4,205   100.0%    $ 6,025   100.0%
                                                         ========   ======      ========  ======    ========  =====
</TABLE>


         At December 31, 2002,  mortgage-backed securities totaled $2.7 million,
or 2.6%,  of total  assets.  ARM  loans  collateralized  54.2% of the  Company's
mortgage-backed  securities portfolio, and fixed-rate loans collateralized 45.8%
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, 2002,  all the Company's  mortgage-backed  securities
were  classified  as "held to  maturity."  At December 31, 2002,  the  Company's
mortgage-backed securities portfolio had a fair value of $2.8 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, 2002,  the Company did not hold any "high-risk  mortgage  securities" in its
portfolio.

DELINQUENCIES AND CLASSIFIED ASSETS

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



                                       9
<PAGE>

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, 2002, the Company had $18,000 in 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,
                                                            --------------------------------------------
                                                            2002      2001      2000      1999      1998
                                                            ----      ----      ----      ----      ----
                                                                        (Dollars  in Thousands)

<S>                                                        <C>       <C>       <C>       <C>       <C>
Delinquent loans:
  One- to four-family residential real estate........      $ 104     $ 909     $ 195     $  --     $  --
  All other real estate..............................         --        --        --        --        --
  Consumer loans, other..............................          6        58        --         6        15
                                                           -----      ------    ------    -------   ------
    Total delinquent loans...........................        110       967       195         6        --
Total real estate owned (1)..........................         19        48        --        --        22
                                                           -------    --------  ------    -------   ------
      Total non-performing assets....................      $ 129     $1,015      195     $   6     $  37
                                                           ======     ======    =======   =======   =======

Total loans delinquent 90 days or more
  to net loans receivable............................        .18%      1.30%     0.29%     0.01%      0.03%
Total loans delinquent 90 days or more
  to total assets....................................        .11%      0.95%     0.20%     0.01%      0.02%
  to total assets....................................        .12%      1.00%     0.20%     0.01%      0.04%



------------------------------------
(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.

</TABLE>


                                       10
<PAGE>




         The  following  table  sets  forth  information  with  respect to loans
delinquent 30-89 days in the Company's portfolio at the dates indicated.

<TABLE>
<CAPTION>

                                                                                At December 31,
                                                           -------------------------------------------------------
                                                             2002        2001        2000        1999         1998
                                                            ------      ------      ------      ------       ------
                                                                                 (In Thousands)

<S>                                                         <C>         <C>         <C>         <C>          <C>
Loans past due 30-89 days:
  One- to four-family residential....................       $1,453      $1,145      $ 588       $ 445        $ 521
  All other mortgages................................          938          --         --          --           --
 Consumer, other.....................................          167         197        208          60           94
                                                            ------      ------      -------     -------      ------
    Total past due 30-89 days........................       $2,558      $1,342      $ 796       $ 505        $ 615
                                                            ======      ======      =======     =======      =====

</TABLE>




         The  following  table  sets  forth  information  with  respect  to  the
Company's delinquent loans and other problem assets at December 31, 2002.

<TABLE>
<CAPTION>

                                                                                         At  December  31, 2002
                                                                                     ----------------------------
                                                                                     Balance               Number
                                                                                          (Dollars in Thousands)

Residential real estate:
<S>                                                                                  <C>                    <C>
  Loans 30 to 89 days delinquent.......................................              $ 1,453                51
  Loans 90 days or more delinquent.....................................                  150                 6
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)............................                  204                48
Foreclosed real estate and repossessions...............................                   18                 1
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..........................                   53                 3

</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, 2002,
the Company had no special mention loans, $1.1 million in substandard assets and
$17,000 in 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,
                                                               ------------------------------------------------------------
                                                                  2002                 2001                 2000
                                                               ---------            ---------            ----------
                                                                                  (In Thousands)

<S>                                                           <C>                   <C>                  <C>
Substandard assets.................................           $   1,070             $  1,396             $     647
Doubtful assets....................................                  17                   42                    --
Loss assets........................................                  --                   --                    --
                                                              ---------             --------             ---------
     Total classified assets.......................           $   1,087             $  1,438             $     647
                                                              =========             ========             =========
</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, 2002, 2001 and 2000,
the Company added $80,000, $ 0, and $0, respectively,  to the provision for loan
losses. The Company's allowance for loan losses totaled $404,000,  $378,000, and
$403,000 at December 31, 2002, 2001, and 2000, respectively.

         Management  believes  that the  allowances  for  losses  on  loans  are
adequate.  While  management uses available  information to recognize  losses on
loans 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,
                                                       -----------------------------------------------------------
                                                       2002            2001        2000        1999           1998
                                                       ----           -----        ----        ----           ----
                                                                            (Dollars in Thousands)

<S>                                                  <C>             <C>          <C>         <C>            <C>
Net loans outstanding.........................       $73,319         $74,492      $69,104     $62,192        $56,572
Average net loans outstanding.................        75,378          72,620       66,222      58,312         55,704
                                                      =======        ========     ========     =======        =======

Allowance balances (at beginning of year).....          378            382               385           385
Provision for losses..........................           80             _                  _             _
                          -...................                                                                      -
Charge-offs...................................           78             25      2          9                  1
Recoveries....................................           24              0                23             6           1
                                                      -------        --------          --------     --------      ------
Allowance balance (at end of year)............      $   404         $  378            $  403         $ 382       $ 385
                                                       ======        ========          ========      =======     =======

Allowance for loan losses as a percent
of net loans receivable at end of year........          0.55%          0. 51%             0.59%        0.61%       0.68%
Net loans charged off as a percent
  of average net loans outstanding............          0.10%          0. 04%             0.01%        0.01%       0.00%
Ratio of allowance for loan losses
  to total nonperforming loans
  at end of year..............................           N/M            39.1%              N/M          N/M         N/M
Ratio of allowance for loan losses
  to total nonperforming loans and REO
  at end of year..............................           N/M            37.2%              N/M          N/M         N/M

</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
$4.0 million in corporate debt securities, all of which were rated A2 or better.
At December 31, 2002,  $12.8 million,  or 52.7%,  of the Company's in investment
securities  were  scheduled  to mature in one year or less,  $10.5  million,  or
43.3%, were scheduled to mature in from one to five years, and $1.0 million,  or
4.0%, 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,
                                                           ------------------------------------------------------------
                                                                  2002                 2001                 2000
                                                               ----------           ---------            ---------
                                                                                   (In Thousands)

Investment portfolio:
<S>                                                           <C>                   <C>                 <C>
  U.S. Government and agency obligations...........           $  3,550              $  1,518            $ 11,518
  Corporate debt securities........................              4,040                 5,096                   _
  Interest-earning deposits in other institutions..             15,976                10,258               5,816
  FHLB stock.......................................                705                   613                 613
                                                              ---------             --------             ---------
    Total investments..............................           $ 24,271              $ 21,060            $ 18,315
                                                              =========             ========            =========

</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, 2002.


<TABLE>
<CAPTION>

                                                                  At December 31, 2002
                              ------------------------------------------------------------------------------------------------------
                              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            $ 2,015         5.16% $4,546        5.34%   $1,029          6.34% $  --           --  $ 7,590       5.4
 FHLB stock...............      705          3.00     --          --        --             --    --           --      705       3.00
  Interest-earning deposits
   in other institutions.... 10,043          1.81  5,933        3.55        --             --    --           --   15.976      2.462
                             ------                -----                --------              ---------           --------
    Total...................$12,763         2.40% $10,479       4.33%    $1,029         6.34% $  --           --   $24,271     3.40%
                             =======        ===== =======       =====    =======        ===== =========      ====  ========    =====

</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 low market 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 $2.2
million in such funds at December 31, 2002.

     DEPOSIT  PORTFOLIO.  Savings in the Company as of December 31,  2002,  were
represented by the various types of deposit programs described below.

<TABLE>
<CAPTION>

  Weighted                                                                                             Percentage
   Average                                                                   Minimum                    of Total
Interest Rate        Minimum Term        Checking and Savings Deposits       Amount       Balances      Deposits
-------------        ------------        -----------------------------       ------       --------      --------
                                                                                       (In Thousands)

<S>                     <C>               <C>                              <C>            <C>              <C>
   0.00%                 None             Noninterest-bearing checking     $     --       $  1,580         2.25%
   0.50                  None             NOW accounts                           --          8,134         11.58
   1.00                  None             Passbook                               --          4,871          6.94
   1.61                  None             Money market accounts               1,000          7,825         11.14

                                                                                   Certificates of Deposit

   1.98%                3 months          Fixed term, fixed rate           $  1,000       $    800         1.14%
   2.24                 6 months          Fixed term, fixed rate              1,000          1,768          2.52
   2.59                 9 months          Fixed term, fixed rate              1,000          1,923          2.74
   2.73                12 months          Fixed term, fixed rate              1,000          4,650          6.62
   2.79                15 months          Fixed term, fixed rate              1,000            938          1.34
   3.52                18 months          Fixed term, fixed rate              1,000         11,308         16.10
   3.63                24 months          Fixed term, fixed rate              1,000          3,157          4.50
   3.95                30 months          Fixed term, fixed rate              1,000            851          1.21
   4.32                36 months          Fixed term, fixed rate              1,000         16,160         23.02
   4.52                48 months          Fixed term, fixed rate              1,000            742          1.06
   4.88             Over 48 months        Fixed term, fixed rate              1,000          5,505          7.84
                                                                                          -----------     ---------
                                                                                         $  70,212       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,
                                  ---------------------------------------------------------------------------------------------
                                               2002                            2001                           2000
                                  ------------------------------  ------------------------------  -----------------------------
                                  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.......................  $  1,580     2.25%    $  (183)    1,763       2.52%  $  1,003    $   760      1.32%   $   586
NOW accounts...................     8,134    11.58        (127)    8,261      11.80        819      7,979     10.02        (61)
Passbooks......................     4,871     6.94         237     4,634       6.62        315      4,319      6.96        240
Money market accounts..........     7,825    11.14         265     7,560      10.80      1,537      6,023      8.89        140
Time deposits that mature:
  within 12 months.............    20,420    29.08     (17,846)   38,266      54.64     11,337     26,865     51.41      3,562
  within 12-36 months..........    24,725    35.21      17,576     7,149      10.21    (10,337)    17,486     20.01     (4,348)
  beyond 36 months.............     2,657     3.78         247     2,410       3.44        696      1,714      1.39       (905)
                                  -------  ----------  ---------  -------  ----------  ---------  -------  ----------  ---------
     Total.....................  $ 70,212   100.00%    $   169  $ 70,042     100.00%  $  5,434   $ 65,146    100.00%   $  (786)
                                  =======  ==========  =========  =======  ==========  =========  =======  ==========  =========


                                 ---------------------------------------
                                               1999                 1998
                                  -----------------------------   -------
                                  Balance  Percent(1)  Change(2)  Balance
                                  -------  ----------  ---------  -------

Noninterest-bearing              $   898       1.32%    $  586   $   312
  demand.......................    6,808      10.02        (61)    6,869
NOW accounts...................    4,730       6.96        240     4,490
Passbooks......................    6,036       8.89        140     5,896
Money market accounts..........
Time deposits that mature:        34,917      51.41      3,562    31,355
  within 12 months.............   13,587      20.01     (4,348)    7,935
  within 12-36 months..........      942       1.39       (905)    1,847
  beyond 36 months.............   -------  ----------  ---------  -------
                                 $67,918     100.00%     $(786)  $68,704
     Total.....................   =======  ==========  =========  =======


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

</TABLE>


                                       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,
                                                               ------------------------------------------------------------
                                                               2002                  2001                    2000
                                                               ----                  -----                   ----
                                                                                (In Thousands)
Rate
----

<S>                                                          <C>                   <C>                     <C>
2.00-3.99%.........................................          $ 24,979              $ 10,874                $     -
4.00-5.99%.........................................            22,775                26,835                  25,660
6.00-7.99%.........................................                48                10,116                  20,405
                                                              ---------             --------                ---------
                                                             $ 47,802              $ 47,825                $ 46,065
                                                              =========             ========                =========

</TABLE>


     TIME  DEPOSIT  MATURITIES.  The  following  table sets forth the amount and
maturities of time deposits at December 31, 2002.

<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)
Rate
----

<S>                                                    <C>        <C>         <C>        <C>        <C>        <C>        <C>
2.00%-3.99%.......................................     $ 15,373    $ 7,245    $ 1,983    $  170     $   197    $   11     $ 24,981
4.00%-5.99%.......................................        4,991      1,015     14,482       652       1,627        --       22,774
6.00-7.99%........................................           48         --         --        --          --        --           48
                                                         ------     -------    -------    ------     -------      -----    --------
                                                        $20,420    $ 8,260     $16,465   $  822     $ 1,824    $   11     $ 47,802
                                                        ========   ========    ========  =======    ========   =======    =========

</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,  2002.  This amount does not include
checking  and  savings   deposits  of  greater  than  $100,000,   which  totaled
approximately $6.2 million at December 31, 2002.

<TABLE>
<CAPTION>

                                                                                               Certificates
         Maturity Period                                                                        of Deposit
                                                                                              (In Thousands)

<S>                                                                                              <C>
         Three months or less...................................................                 $ 1,341
         Three through six months...............................................                     300
         Six through twelve months..............................................                     706
         Over twelve months.....................................................                   3,838
                                                                                                 -------
              Total.............................................................                 $ 6,185
                                                                                                 =======

</TABLE>



                                       17
<PAGE>

     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,
                                                               ----------------------------------------------------
                                                                2002                 2001                 2000
                                                               ------               ------               ------
                                                                                 (In Thousands)

<S>                                                           <C>                   <C>                  <C>
Deposits...........................................           $147,024              $135,208             $143,551
Withdrawals........................................            148,414               131,100              148,031
                                                               -------              -------               -------
Net increase (decrease) before interest credited...            (1,390)               4,108                (4,480)
Interest credited..................................             1,560                1,326                 1,249
                                                               -------              -------               -------
  Net increase (decrease) increase in deposits.....           $   170               $5,434               $(3,231)
                                                              ========              =======               =======
</TABLE>


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, 2002, the Company had $9.7 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,
                                                               -------------------------------------------------
                                                               2002                  2001            2000
                                                               ----                  ----            ----

<S>                                                            <C>                   <C>             <C>
Weighted average rate paid on FHLB advance.........            5.15%                 5.73%           5.76%
</TABLE>



                                       18
<PAGE>

<TABLE>
<CAPTION>

                                                                    During the Year Ended December 31,
                                                                ------------------------------------------

                                                                2002              2001                 2000
                                                               -------          ---------            --------
                                                                           (Dollars in Thousands)

<S>                                                           <C>               <C>                 <C>
Maximum amount of FHLB Advance
   outstanding at any month........................           $  9,700          $  9,700            $  8,200

Approximate average FHLB advance
  outstanding......................................              9,700             7,783               4,908

Approximate weighted average rate
  paid on FHLB advance.............................              5.15%            5.73%               5.76%

</TABLE>


EMPLOYEES

     As of December  31,  2002,  the Company  had 24  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

                                       19
<PAGE>

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 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,  2002.  As of
December 31, 2002,  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, 2002, the Bank maintained
94.8% 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,  a
savings  bank which is a  subsidiary  of a holding  company,  as well as certain
other  savings  banks,  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 Company has declared and paid dividends of $731,600 during the
year ended December 31, 2002.

                                       20
<PAGE>


     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 2002 was 30.0%,  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, 2002, the
Bank was required to pay a semi-annual assessment of approximately $15,500.

     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
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,  2002,  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

                                       21
<PAGE>

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  have
adopted  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 capital  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,  all 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
intangible  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 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, 2002 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, 2002.

                                 For capital             To be well  capitalized
                                   adequacy            under  prompt  corrective
             Actual              purposes                  actionprovisions
          -----------          ------------             ----------------------

                                       22
<PAGE>

<TABLE>
<CAPTION>


                            Amount        Percent        Amount        Percent        Amount        Percent

<S>                      <C>               <C>        <C>              <C>         <C>                <C>
Tangible capital         $ 21,530,000      20.9%      $ 1,545,000      1.5%        $   -              -%
Tier I (core)capital       21,530,000      20.9         4,154,000      4.0            5,148,000     5.0
Risk based capital         21,799,000      44.6         3,912,000      8.0            4,890,000     10.0
Tier I risk-based capital  21,530,000      44.0             -           -             2,934,000     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, 2002 the Bank had $704,900 in FHLB stock, which was in
compliance with this requirement.  In past years the Bank has received dividends
on its FHLB stock.  Dividends for the year ended and at December 31, 2002,  were
2.97% and 2.99%  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 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.


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.

                                       23
<PAGE>



HOLDING COMPANY REGULATION

     GENERAL.  WCF  Financial,  M.H.C.  which owns the majority of the Company's
common  stock   outstanding   (the  "Holding   Company")  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

                                       24
<PAGE>

regulation,  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.

     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
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.

                                       25
<PAGE>


     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.

THE USA PATRIOT ACT

     In  response  to  the  events  of  September  11,  2001,  the  Uniting  and
Strengthening  America by Providing  Appropriate Tools Required to Intercept and
Obstruct  Terrorism  Act of 2001, or the USA PATRIOT Act, was signed into law on
October 26, 2001. The USA PATRIOT Act gives the federal government new powers to
address terrorist threats through enhanced domestic security measures,  expanded
surveillance  powers,  increased  information  sharing and broadened  anti-money
laundering requirements. By way of amendments to the Bank Secrecy Act, Title III
of the USA PATRIOT Act takes measures intended to encourage  information sharing
among bank regulatory  agencies and law  enforcement  bodies.  Further,  certain
provisions  of Title III  impose  affirmative  obligations  on a broad  range of
financial  institutions,  including banks,  thrifts,  brokers,  dealers,  credit
unions,  money  transfer  agents  and  parties  registered  under the  Commodity
Exchange Act.

Among other requirements, Title III of the USA PATRIOT Act imposes the following
requirements with respect to financial institutions:

           o  Pursuant  to  Section  352,  all  financial  institutions  must
              establish anti-money laundering programs that include, at minimum:
              (i) internal  policies,  procedures,  and controls;  (ii) specific
              designation of an anti-money laundering compliance officer;  (iii)
              ongoing employee training programs;  and (iv) an independent audit
              function to test the anti-money laundering program.

           o  Section  326  authorizes  the  Secretary  of the  Department  of
              Treasury,  in  conjunction  with other bank  regulators,  to issue
              regulations by October 26, 2002 that provide for minimum standards
              with respect to customer  identification  at the time new accounts
              are opened.

           o  Section 312  requires  financial  institutions  that  establish,
              maintain,  administer,  or  manage  private  banking  accounts  or
              correspondence accounts in the United States for non-United States
              persons or their  representatives  (including foreign  individuals
              visiting the United  States) to establish  appropriate,  specific,
              and, where necessary, enhanced due diligence policies, procedures,
              and controls designed to detect and report money laundering.

           o  Financial   institutions  are  prohibited  from   establishing,
              maintaining,  administering or managing correspondent accounts for
              foreign  shell  banks  (foreign  banks that do not have a physical
              presence in any  country),  and will be subject to certain  record
              keeping  obligations  with  respect to  correspondent  accounts of
              foreign banks.

                                       26
<PAGE>


           o  Bank  regulators  are  directed to consider a holding  company's
              effectiveness in combating money laundering when ruling on Federal
              Reserve Act and Bank Merger Act applications.

     The  federal   banking   agencies  have  begun  to  propose  and  implement
regulations  pursuant  to the  USA  PATRIOT  Act.  These  proposed  and  interim
regulations  would  require  financial  institutions  to adopt the  policies and
procedures contemplated by the USA PATRIOT Act.

SARBANES-OXLEY ACT OF 2002

     On July 30, 2002, the President signed into law the  Sarbanes-Oxley  Act of
2002  ("Sarbanes-Oxley"),  which  implemented  legislative  reforms  intended to
address  corporate and accounting  fraud. In addition to the  establishment of a
new accounting  oversight board that will enforce auditing,  quality control and
independence  standards  and will be  funded by fees  from all  publicly  traded
companies,  Sarbanes-Oxley  places certain restrictions on the scope of services
that may be provided by accounting  firms to their public company audit clients.
Any  non-audit  services  being  provided to a public  company audit client will
require   pre-approval   by  the  company's   audit   committee.   In  addition,
Sarbanes-Oxley  makes  certain  changes to the  requirements  for audit  partner
rotation  after a  period  of  time.  Sarbanes-Oxley  requires  chief  executive
officers and chief financial  officers,  or their equivalent,  to certify to the
accuracy of periodic reports filed with the Securities and Exchange  Commission,
subject to civil and criminal  penalties if they knowingly or willingly  violate
this certification requirement.  The Company's Chief Executive Officer and Chief
Financial  Officer have signed  certifications  to this Form 10-K as required by
Sarbanes-Oxley.  In addition, under Sarbanes-Oxley,  counsel will be required to
report  evidence of a material  violation of the securities  laws or a breach of
fiduciary  duty by a company to its chief  executive  officer or its chief legal
officer,  and, if such officer does not  appropriately  respond,  to report such
evidence  to the audit  committee  or other  similar  committee  of the board of
directors or the board itself.

     Under   Sarbanes-Oxley,   longer  prison  terms  will  apply  to  corporate
executives who violate federal  securities laws; the period during which certain
types of suits can be brought against a company or its officers is extended; and
bonuses issued to top executives  prior to restatement of a company's  financial
statements  are now  subject  to  disgorgement  if such  restatement  was due to
corporate misconduct.  Executives are also prohibited from trading the company's
securities  during  retirement  plan  "blackout"  periods,  and loans to company
executives  (other than loans by  financial  institutions  permitted  by federal
rules and regulations)  are restricted.  In addition,  a provision  directs that
civil penalties levied by the Securities and Exchange  Commission as a result of
any judicial or  administrative  action under  Sarbanes-Oxley  be deposited to a
fund for the benefit of harmed  investors.  The Federal  Accounts  for  Investor
Restitution  provision also requires the  Securities and Exchange  Commission to
develop methods of improving  collection rates. The legislation  accelerates the
time  frame for  disclosures  by  public  companies,  as they  must  immediately
disclose  any  material  changes in their  financial  condition  or  operations.
Directors and executive officers must also provide  information for most changes
in ownership in a company's securities within two business days of the change.

     Sarbanes-Oxley  also  increases  the  oversight  of, and  codifies  certain
requirements  relating  to audit  committees  of public  companies  and how they
interact with the company's "registered public accounting firm." Audit committee
members must be independent and are absolutely barred from accepting consulting,
advisory or other compensatory fees from the issuer. In addition, companies must
disclose  whether at least one member of the  committee is a "financial  expert"
(as such term is defined by the Securities and Exchange  Commission) and if not,
why not. Under Sarbanes-Oxley,  a company's registered public accounting firm is
prohibited from performing  statutorily mandated audit services for a company if
such company's chief executive officer,  chief financial  officer,  comptroller,
chief accounting officer or any person serving in equivalent  positions had been
employed by such firm and  participated  in the audit of such company during the
one-year  period  preceding  the  audit  initiation  date.  Sarbanes-Oxley  also


                                       27
<PAGE>

prohibits  any officer or director of a company or any other person acting under
their  direction  from  taking any  action to  fraudulently  influence,  coerce,
manipulate  or mislead any  independent  accountant  engaged in the audit of the
company's  financial  statements  for the  purpose of  rendering  the  financial
statements  materially  misleading.  Sarbanes-Oxley also requires the Securities
and Exchange  Commission to prescribe rules requiring  inclusion of any internal
control   report  and   assessment   by  management  in  the  annual  report  to
shareholders. Sarbanes-Oxley requires the company's registered public accounting
firm that  issues  the audit  report  to  attest to and  report on  management's
assessment of the company's internal controls.

     Although we anticipate that we will incur  additional  expense in complying
with the  provisions of the  Sarbanes-Oxley  Act and the resulting  regulations,
management  does not expect that such  compliance will have a material impact on
our results of operations or financial condition.

                           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 December 31, 2002 and 2001,  the Bank had federal income
tax  bad  debt  reserves  of  approximately   $2.4  million,   which  constitute
allocations  to bad debt  reserves for federal  income tax purposes for which no
provision for taxes on income had been made.

     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

                                       28
<PAGE>

regular  taxable income (which certain  adjustments)  and tax preference  items,
less any  available  exemption.  The  alternative  minimum tax is imposed to the
extent it exceeds  Company's  regular  income tax and net  operating  losses can
offset no more than 90% of alternative minimum income.

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

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

IOWA TAXATION

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

     The State of Iowa  imposes a tax on the Iowa  franchise  taxable  income of
savings  institutions  at the  rate of 5%.  Iowa  franchise  taxable  income  is
generally  similar to federal taxable income except that interest from state and
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, 2002, the net book value of the Company's
property and equipment was $726,135.

     (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, 2002.

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, 2002, the Company was not
involved in any material claim or lawsuit.

                                       29
<PAGE>


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, 2002 to a vote of security holders.

                                     PART II

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

     For information  concerning the market for the Company's  common stock, the
section captioned "Stockholder Information--Stock Listing" and "--Price Range of
Common Stock and Dividends Paid" of the Company's  Annual Report to Stockholders
for the Year Ended  December 31, 2002 (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  14-40 of the  Company's  2002  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 2002.












                                    PART III

                                       30
<PAGE>


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 14, 2003
(the  "Proxy   Statement"),   specifically  the  section   captioned   "Proposal
I--Election  of Directors.  The  following  table sets forth  information  as of
December 31, 2002, with respect to the executive officers of the Company.

NAME                            AGE                OCCUPATION

Phyllis A. Murphy               52               President and Chief
                                                 Executive Officer

Stephen L. Mourlam              50            Executive Vice President and
                                                 Chief Financial Officer

Kyle R. Swon                    41              Senior Vice President and
                                                  Chief Lending Officer

ITEM 10. EXECUTIVE COMPENSATION

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

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

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

ITEM 12. CERTAIN TRANSACTIONS

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

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

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



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

                                       31
<PAGE>


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

    10.1.A   Severance  Agreement,  as amended between the Company,  the Bank
             and Phyllis A. Murphy,  President  and Chief  Executive  Officer as
             originally filed with the December 2000, 10-KSB.

    10.1.B   Severance  Agreement,  as amended between the Company,  the Bank
             and  Stephen  L.  Mourlam,   Executive  Vice  President  and  Chief
             Financial  Officer  as  originally  filed with the  December  2000,
             10-KSB.

    10.1.C   Severance Agreement, as amended between the Company, the Bank and
             Kyle R. Swon,  Senior Vice  President and Chief Lending  Officer as
             originally filed with the December 2000, 10-KSB..

         13  2002 Annual Report to Stockholders

         21  Subsidiaries of the Registrant

       99.1  Certification  of Chief  Executive  Officer  and Chief  Financial
             Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act
             of 2002.

(b)      REPORTS ON FORM 8-K:

         The  Registrant  filed no Current  Report on Form 8-K during the fourth
         quarter of 2002.

ITEM 14. CONTROLS AND PROCEDURES

     (a) Evaluation of disclosure controls and procedures. Under the supervision
and with the participation of management,  including our Chief Executive Officer
and Chief Financial  Officer,  we evaluated the  effectiveness of the design and
operation  of our  disclosure  controls  and  procedures  (as  defined  in  Rule
13a-14(c)  under the Exchange Act) as of a date (the  "Evaluation  Date") within
90days  prior to the filling of this  report.  Based upon that  evaluation,  the
Chief Executive  Officer and Chief Financial  Officer  concluded that, as of the
Evaluation Date, our disclosure controls and procedures were effective in timely
alerting them to the material  information  relating to us (or our  consolidated
subsidiaries) required to be included in our periodic SEC filings.

     (b) Change in internal controls.

         There were no significant  changes made in our internal controls during
     the period  covered by this report or, to our  knowledge,  in other factors
     that could  significantly  affect these controls  subsequent to the date of
     the evaluation.

         See the Certification pursuant to Section 302 of the Sarbanes-Oxley Act
     of 2002, which immediately precedes the signature page.



                                       32
<PAGE>


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


     I, Phyllis A. Murphy, President and Chief Executive Officer, certify that:

1.   I have  reviewed  this  annual  report on Form  10-KSB of  Webster  City
     Federal Bancorp;

2.   Based on my  knowledge,  this annual  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge,  the financial  statements,  and other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)  designed  such  disclosure  controls  and  procedures  to  ensure  that
         material  information   relating  to  the  registrant,   including  its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         annual report (the "Evaluation Date"); and

     c)  presented in this annual report our conclusions about the effectiveness
         of the disclosure controls and procedures based on our evaluation as of
         the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based
     on our most recent evaluation,  to the registrant's  auditors and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a)  all  significant  deficiencies  in the design or  operation of internal
         controls  which  could  adversely  affect the  registrant's  ability to
         record,   process,   summarize  and  report  financial  data  and  have
         identified  for the  registrant's  auditors any material  weaknesses in
         internal controls; and

     b)  any fraud,  whether or not material,  that involves management or other
         employees  who have a  significant  role in the  registrant's  internal
         controls; and

 6.  The registrant's other certifying officers and I have indicated in this
     annual  report  whether  there were  significant  changes  in  internal
     controls or in other factors that could  significantly  affect internal
     controls  subsequent  to  the  date  of  our  most  recent  evaluation,
     including   any   corrective   actions   with  regard  to   significant
     deficiencies and material weaknesses.




---------------------------------          -------------------------------------
 Date                                      Phyllis A. Murphy
                                           President and Chief Executive Officer

                                       33
<PAGE>





                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


     I,  Stephen  L.  Mourlam,  Executive  Vice  President  and Chief  Financial
     Officer, certify that:

1.   I have  reviewed  this  annual  report on Form  10-KSB of  Webster  City
     Federal Bancorp;

2.   Based on my  knowledge,  this annual  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge,  the financial  statements,  and other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a. designed such disclosure controls and procedures to ensure that material
        information  relating  to the  registrant,  including  its  consolidated
        subsidiaries,  is made  known to us by  others  within  those  entities,
        particularly  during  the period in which  this  annual  report is being
        prepared;

     b. evaluated the effectiveness of the registrant's  disclosure controls and
        procedures  as of a date within 90 days prior to the filing date of this
        annual report (the "Evaluation Date"); and

     c. presented in this annual report our conclusions  about the effectiveness
        of the disclosure  controls and procedures based on our evaluation as of
        the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based
     on our most recent evaluation,  to the registrant's  auditors and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a. all  significant  deficiencies  in the design or  operation  of internal
        controls  which  could  adversely  affect  the  registrant's  ability to
        record, process, summarize and report financial data and have identified
        for the  registrant's  auditors  any  material  weaknesses  in  internal
        controls; and

     b. any fraud,  whether or not material,  that involves  management or other
        employees  who  have a  significant  role in the  registrant's  internal
        controls; and

6.   The registrant's other certifying  officers and I have indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.



--------------------------                          ----------------------------
Date                                                Stephen L. Mourlam
                                                    Executive Vice President and
                                                    Chief Financial Officer


                                       34
<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, 2003                         By:  /s/
                                                      --------------------------
                                                   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.



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


     Date:  March 21, 2003                    Date: March 21, 2003



By:  /s/                                                 By: /s/
        -----------------------------------------           --------------------
     Dr. Carroll E. Haynes, Chairman of the Board     Donald I. Newman, Director

     Date:  March 21, 2003                            Date: March 21, 2003


By:  /s/                                              By: /s/
        --------------------------                          --------------------
     Dennis J. Tasler, Director                       Dr. Leo Moriarty, Director

     Date:  March 21, 2003                            Date: March 21, 2003

By: /s/
       ------------------------------------------------
       Kyle R. Swon, Senior Vice President and Director

       Date: March 21, 2003


                                       35
<PAGE>




                                   EXHIBIT 13


                       2002 ANNUAL REPORT TO STOCKHOLDERS



<PAGE>




                                   EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT




   PARENT COMPANY           SUBSIDIARY COMPANY        STATE OF INCORPORATION
   --------------           ------------------        ----------------------


Webster City Federal   Bancorp Webster City Federal          Federal
                               Savings Bank

Webster City Federal     WCF Service Corporation              Iowa
     Savings
Webster City Federal    Security Title & Abstract             Iowa
     Bancorp


<PAGE>


                                                                    EXHIBIT 99.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Phyllis A. Murphy, President and Chief Executive Officer and Stephen L. Mourlam,
Executive  Vice  President and Chief  Financial  Officer of Webster City Federal
Bancorp  ("the  Company")  each  certify in their  capacity as an officer of the
Company that they have  reviewed the annual report of the Company on Form 10-KSB
for the  fiscal  year  ended  December  31,  2002  and that to the best of their
knowledge:

     (1) the report fully  complies with the  requirements  of Sections 13(a) of
     the Securities Exchange Act of 1934; and

     (2)  the  information  contained  in the  report  fairly  presents,  in all
     material respects, the financial condition and results of operations.

The purpose of this  statement  is solely to comply  with Title 18,  Chapter 63,
Section  1350 of the United  States  Code,  as  amended  by  Section  906 of the
Sarbanes-Oxley Act of 2002.



---------------------------------          ------------------------------------
Date                                       Phyllis A. Murphy
                                           President and Chief Executive Officer



--------------------------------           -------------------------------------
Date                                       Stephen L. Mourlam
                                           Executive Vice President,
                                           Chief Financial Officer