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

                                   FORM 10-KSB

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

                  For the Fiscal Year Ended September 30, 2001


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

             For the transition period from _________ to __________

                         Commission File Number: 0-30483


                           DUTCHFORK BANCSHARES, INC.
                 (Name of small business issuer in its charter)

       DELAWARE                                          57-1094236
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

1735 Wilson Road, Newberry, South Carolina                  29108
 (Address of principal executive offices)                 (Zip Code)

         Issuer's telephone number, including area code: (803) 321-3200
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
                                (Title of Class)

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

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

     The issuer's gross revenues for the fiscal year ended September 30, 2001
were $20,375,000.

     The aggregate market value of the voting and non-voting common equity held
by non-affiliates was $24,354,201 based upon the average of the bid and asked
price ($20.57 per share) as quoted on the Nasdaq SmallCap Market on December 10,
2001. Solely for purposes of this calculation, the shares held by the directors
and officers of the registrant are deemed to be held by affiliates.

     The number of shares outstanding of the registrant's common stock as of
December 10, 2001 was 1,322,350.


                       DOCUMENTS INCORPORATED BY REFERENCE

 Portions of the 2001 Annual Report to Stockholders and of the Proxy Statement
  for the 2002 Annual Meeting of Stockholders are incorporated by reference in
               Parts II and III, respectively, of this Form 10-KSB

   Transitional Small Business Disclosure Format (check one): Yes [_] No [X]


<PAGE>


                                      INDEX

                                     Part I
                                                                            Page

Item 1   Description of Business...............................................3
Item 2   Description of Properties............................................31
Item 3   Legal Proceedings....................................................31
Item 4   Submission of Matters to a Vote of Securities Holders................31

                                     Part II

Item 5.  Market for Common Equity and Related Stockholder Matters.............32
Item 6.  Management's Discussion and Analysis or Plan of Operation............32
Item 7.  Financial Statements.................................................32
Item 8.  Changes In and Disagreements with Accountants on
         Accounting and Financial Disclosure .................................32

                                    Part III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act....................32
Item 10. Executive Compensation...............................................32
Item 11. Security Ownership of Certain Beneficial Owners and Management.......32
Item 12. Certain Relationships and Related Transactions.......................32
Item 13. Exhibits and Reports on Form 8-K.....................................33


<PAGE>




     This report contains certain "forward-looking statements" within the
meaning of the federal securities laws. These statements are not historical
facts, rather statements based on DutchFork Bancshares, Inc.'s current
expectations regarding its business strategies, intended results and future
performance. Forward-looking statements are preceded by terms such as "expects,"
"believes," "anticipates," "intends" and similar expressions.

     Management's ability to predict results or the effect of future plans or
strategies is inherently uncertain. Factors which could affect actual results
include interest rate trends, the general economic climate in the market area in
which DutchFork Bancshares, Inc. operates, as well as nationwide, DutchFork
Bancshares, Inc.'s ability to control costs and expenses, competitive products
and pricing, loan delinquency rates and changes in federal and state legislation
and regulation. These factors should be considered in evaluating the
forward-looking statements and undue reliance should not be placed on such
statements. DutchFork Bancshares, Inc. assumes no obligation to update any
forward-looking statements.


                                     PART I

Item 1. DESCRIPTION OF BUSINESS

General

     DutchFork Bancshares,  Inc., headquartered in Newberry, South Carolina, was
formed in February 2000 as the holding company for Newberry Federal Savings Bank
in connection with the conversion of Newberry  Federal from mutual to stock form
of ownership.  The  conversion was completed on July 5, 2000 through the sale of
1,560,550  shares of common stock by DutchFork  Bancshares  at a price of $10.00
per share.  DutchFork Bancshares' sole business activity is the ownership of all
of Newberry Federal's capital stock.  DutchFork Bancshares does not transact any
material business other than through its subsidiary, Newberry Federal. DutchFork
Bancshares is subject to the regulation of the Office of Thrift  Supervision and
the Securities and Exchange  Commission.  DutchFork  Bancshares is listed on the
Nasdaq SmallCap Market under the symbol DFBS.

     Newberry  Federal's  principal  business is  attracting  deposits  from the
general public and originating loans secured by one-to-four  family  residential
real  estate  properties  located  in its market  area.  Newberry  Federal  also
maintains a significant investment securities portfolio primarily because of the
low loan demand in its primary market area. Newberry Federal is regulated by the
Office of Thrift  Supervision  and the Federal  Deposit  Insurance  Corporation.
Newberry  Federal's  deposits  are  federally  insured  by the  Federal  Deposit
Insurance  Corporation and are currently insured to the maximum allowable amount
by the Federal  Deposit  Insurance  Corporation  under the  Savings  Association
Insurance  Fund.  Newberry  Federal  is a member of the  Federal  Home Loan Bank
System.

Market Area

     Newberry  Federal is headquartered  in Newberry,  South Carolina.  Newberry
Federal's  primary  deposit  gathering and lending area is  concentrated  in the
communities  surrounding its three banking  offices located in Newberry  County,
although  Newberry  Federal  also  originates  loans to  borrowers  and  accepts
deposits  from  individuals  residing  in  the  bordering  areas  of  contiguous
counties. Newberry County is located in central South Carolina, approximately 35
miles northwest of Columbia, the state capital.

     Newberry  County is located  northwest  of  Columbia  on  Interstate  26 in
central South  Carolina.  On average,  the  demographics  of Newberry County are
weaker than South Carolina and the U.S. as a whole.

Competition

     Newberry  Federal faces intense  competition for the attraction of deposits
and origination of loans in its primary market area. Its most direct competition
for deposits has historically come from the several commercial and savings banks
operating in Newberry  Federal's  primary  market area and, to a lesser  extent,
from other financial  institutions,  such as brokerage firms,  credit unions and

                                       3


<PAGE>


insurance companies.  While those entities still provide a source of competition
for deposits,  Newberry  Federal  currently  faces  significant  competition for
deposits from the mutual fund industry as customers seek alternative  sources of
investment for their funds. Newberry Federal also faces significant  competition
for  investors'  funds from their  direct  purchase of  short-term  money market
securities and other corporate and government securities. While Newberry Federal
faces competition for loans from a significant number of financial institutions,
primarily  savings  banks and  commercial  banks in its  market  area,  its most
significant  competition comes from other financial service  providers,  such as
the mortgage  companies  and mortgage  brokers  operating in its primary  market
area.  Additionally,  competition  may  increase  as a result of the  lifting of
restrictions on the interstate  operations of financial  institutions and due to
the increasing trend for non-depository financial service companies entering the
financial services market, such as insurance companies, securities companies and
specialty financial  companies.  Competition for deposits and the origination of
loans may limit Newberry Federal's growth in the future.

Lending Activities

     General. The types of loans that Newberry Federal may originate are limited
by federal laws and regulations. Interest rates that Newberry Federal charges on
loans are affected  principally  by its current  asset/liability  strategy,  the
demand for the type of loans being originated, the supply of money available for
lending purposes and the rates offered by competitors.  All of these factors are
affected by general and economic  conditions,  monetary  policies of the federal
government,  including the Federal  Reserve Board,  legislative tax policies and
governmental budgetary matters.


                                       4


<PAGE>


     Loan Portfolio  Analysis.  The following  table presents the composition of
Newberry  Federal's loan portfolio at the dates indicated.  Newberry Federal had
no  concentration of loans exceeding 10% of total loans receivable other than as
disclosed below.

<TABLE>
<CAPTION>

                                                                           At September 30,
                                      ----------------------------------------------------------------------------------------------
                                             2001             2000               1999                1998                1997
                                      -----------------  ----------------   -----------------   ----------------   -----------------
                                               Percent           Percent             Percent            Percent             Percent
                                       Amount  of Total  Amount  of Total   Amount   of Total   Amount  of Total   Amount   of Total
                                      -------  --------  ------  --------   ------   --------   ------  --------   ------   --------
                                                                          (Dollars in thousands)
<S>                                    <C>       <C>     <C>       <C>     <C>        <C>      <C>        <C>      <C>        <C>
Real estate loans:
  One- to four-family ..............   $43,061   55.32%  $52,439   63.35%   $48,984    63.79%  $44,543    61.78%   $42,173    62.54%
  Commercial real estate (1) .......     8,917   11.46    12,548   15.15      9,794    12.75     9,119    12.65      8,174    12.13
  Construction .....................     2,278    2.93     1,302    1.57      1,695     2.21     1,173     1.63        969     1.44
  Land .............................     1,607    2.06     1,548    1.87      1,432     1.86     1,510     2.09      1,172     1.74
                                       -------   -----   -------   -----    -------    -----   -------    -----    -------    -----
      Total real estate loans ......    55,863   71.77    67,837   81.94     61,905    80.61    56,345    78.15     52,488    77.85
                                       -------   -----   -------   -----    -------    -----   -------    -----    -------    -----
Consumer loans:
  Second mortgage loans, home equity     4,354    5.59     4,989    6.03      4,318     5.62     4,236     5.88      2,953     4.38
    loans and lines of credit
  Automobile .......................     4,209    5.41     4,574    5.53      4,398     5.73     4,192     5.81      4,819     7.15
  Other ............................     4,793    6.15     4,563    5.51      4,278     5.57     4,709     6.54      5,116     7.59
                                       -------   -----   -------   -----    -------    -----   -------    -----    -------    -----
      Total consumer loans .........    13,356   17.15    14,126   17.07     12,994    16.92    13,137    18.23     12,888    19.12

Commercial loans....................     8,622   11.08       820    0.99      1,892     2.47     2,614     3.63      2,041     3.03
                                       -------   -----   -------   -----    -------    -----   -------    -----    -------    -----
      Total loans...................    77,841  100.00%   82,783  100.00%    76,791   100.00%   72,096   100.00%    67,417   100.00%
                                                ======            ======              ======             ======              ======
Less:
  Deferred loan origination fees
    and discounts...................       (19)             (104)              (108)              (113)               (118)
  Loans in process..................    (4,100)           (3,906)            (1,175)              (553)             (1,110)
  Allowance for loan losses.........      (635)             (465)              (184)              (181)               (192)
                                       -------           -------            -------            -------             -------
      Total loans, net..............   $73,098           $78,308            $75,324            $71,249             $65,997
                                       =======           =======            =======            =======             =======

--------
(1) Also includes an immaterial amount of multi-family loans.

</TABLE>


                                       5


<PAGE>


     One- to Four-Family Real Estate Loans.  Newberry  Federal's primary lending
activity is the  origination of loans secured by one- to four-family  residences
located in its primary market area.  Newberry  Federal offers several fixed- and
adjustable-rate  mortgage loan products.  The loan fees charged,  interest rates
and other  provisions of Newberry  Federal's  mortgage  loans are  determined by
Newberry Federal on the basis of its own pricing criteria and market conditions.
Although  Newberry Federal  originates all loans on loan documents  approved for
use by Fannie Mae and Freddie Mac, the loans are generally not eligible for sale
in the secondary market because of various factors,  including credit standards,
that do not conform to secondary market guidelines.

     Newberry  Federal's  fixed-rate loans typically have maturities of 15 to 30
years, although 15 to 20 year terms constitute the largest percentage of current
originations. Generally, all conforming fixed-rate loans with maturities over 15
years are sold in the secondary market.

     Newberry Federal's  adjustable-rate mortgage loans are typically based on a
15-year  or 30-year  amortization  schedule  with  interest  rates  that  adjust
annually based on the one-year U.S. Treasury Bill rate.  Occasionally,  Newberry
Federal  offers   adjustable-rate   mortgage  loans  with  initial  rates  below
prevailing rates,  although loans are generally  underwritten based on the fully
indexed  interest  rate.  The maximum  amount by which the interest  rate may be
increased or decreased in a given period on  adjustable-rate  mortgage  loans is
generally  1% per year and the lifetime  interest  rate cap is generally 5% over
the initial interest rate of the loan.  Newberry Federal  qualifies the borrower
based on the borrower's ability to repay the adjustable-rate mortgage loan based
on the maximum interest rate at the first adjustment.  Newberry Federal does not
originate  negative   amortization  loans.  The  terms  and  conditions  of  the
adjustable-rate mortgage loans offered by Newberry Federal,  including the index
for interest rates,  may vary from time to time.  Newberry Federal believes that
the  annual  adjustment  feature  of its  adjustable-rate  mortgage  loans  also
provides  flexibility  to  meet  competitive   conditions  as  to  initial  rate
concessions while limiting the duration of the initial rate concession.

     Adjustable-rate  mortgage loans help reduce Newberry  Federal's exposure to
changes in interest  rates.  There are,  however,  unquantifiable  credit  risks
resulting from the potential of increased  costs due to changed rates to be paid
by the borrower. It is possible that during periods of rising interest rates the
risk of default on  adjustable-rate  mortgage  loans may increase as a result of
repricing and the  increased  payments  required by the  borrower.  In addition,
although  adjustable-rate  mortgage loans allow Newberry Federal to increase the
sensitivity of its asset base to changes in interest  rates,  the extent of this
interest  sensitivity  is  limited  by the annual  and  lifetime  interest  rate
adjustment limits. Because of these considerations  Newberry Federal can give no
assurance  that yields on  adjustable-rate  mortgage loans will be sufficient to
offset  increases in Newberry  Federal's  cost of funds during periods of rising
interest  rates.  Newberry  Federal  believes these risks,  which have not had a
material adverse effect on Newberry Federal to date, generally are less than the
risks  associated  with holding  fixed-rate  loans in its  portfolio in a rising
interest rate environment.

     Newberry Federal's  residential  mortgage loans typically do not exceed 80%
of the appraised  value of the property.  Newberry  Federal's  lending  policies
permit  Newberry  Federal  to  lend  up to  95% of the  appraised  value  of the
property;   however,   Newberry  Federal  generally  requires  private  mortgage
insurance  on the  portion  of the  principal  amount  that  exceeds  80% of the
appraised value of the property.

     Newberry Federal also requires fire, casualty, title, hazard insurance and,
if appropriate,  flood  insurance be maintained on all properties  securing real
estate loans made by Newberry Federal. An independent  state-certified appraiser
generally appraises all properties.

     In an effort to provide  financing  for  first-time  home buyers,  Newberry
Federal offers a first-time home buyers program to qualified individuals.  Under
this program  Newberry Federal offers single family  residential  mortgage loans
that are originated using Newberry Federal's standard  underwriting  guidelines,
but with reduced  downpayment  requirements.  Newberry  Federal does not require
private mortgage insurance on these loans unless the loan balance exceeds 90% of
the lower of the appraised  value or selling price of the property  securing the
loan.

     Commercial Real Estate Loans.  Newberry Federal  originates  mortgage loans
for the  acquisition  and  refinancing  of  commercial  real estate  properties.
Commercial  real  estate  loans are fully  amortizing  loans that are  generally
originated with variable rates tied to the prime lending rate. The


                                       6


<PAGE>


maximum  loan-to-value ratio for a commercial loan is generally 75% of appraised
value.  Newberry Federal's commercial real estate loans are generally secured by
office,  motel, retail and owner occupied properties and churches,  all of which
are located in Newberry Federal's primary market area.

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

     Residential  Construction Loans.  Newberry Federal originates  construction
loans to individuals and home builders located within Newberry Federal's primary
market  area  for the  construction  and  acquisition  of  personal  residences.
Newberry Federal does not originate commercial construction loans or speculative
construction loans to builders.

     Construction  loans  generally  provide for the  payment of  interest  only
during the construction  phase,  which is usually four to six months. At the end
of the  construction  phase,  the loan  converts  automatically  to a  permanent
mortgage  loan without a new loan  closing.  Construction  loans are made with a
maximum loan to value ratio of 90%,  provided that the borrower  obtains private
mortgage  insurance on the loan if the loan balance exceeds 80% of the appraised
value or sales price, whichever is less, of the secured property.

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

     Construction  lending  generally  involves  a higher  degree  of risk  than
single-family  permanent  mortgage lending because of the greater  potential for
disagreements  between borrowers and builders and the failure of builders to pay
subcontractors.  Additional risk often exists because of the inherent difficulty
in estimating both a property's value and the estimated cost of the property. If
the estimate of construction cost proves to be inaccurate,  Newberry Federal may
be required to advance funds beyond the amount  originally  committed to protect
the value of the property. If the estimate of value upon completion proves to be
inaccurate,  Newberry  Federal may be confronted  with a property whose value is
insufficient  to assure  full  repayment.  Newberry  Federal  has  attempted  to
minimize the foregoing risks by, among other things,  limiting its  construction
lending to  residential  properties,  not making loans to builders and by having
all  construction  loans convert to permanent  mortgage  loans at the end of the
construction phase.

     Land Loans.  Newberry  Federal  occasionally  originates  loans  secured by
unimproved  land.  These loans have terms of up to 15 years and  generally  have
fixed interest rates and loan-to-value ratios of up to 90% of appraised value.

     Consumer  Loans.  Newberry  Federal's  consumer loans consist  primarily of
second  mortgage  loans,  home equity lines of credit and fully  amortized  home
equity loans,  all of which are secured by  owner-occupied  one- to  four-family
residences, as well as automobile loans.

     The underwriting standards employed by Newberry Federal for second mortgage
loans,  home equity  loans and lines of credit  include a  determination  of the
applicant's  credit history,  an assessment of the  applicant's  ability to meet
existing  obligations  and  payments on the  proposed  loan and the value of the
collateral  securing the loan. Home equity lines of credit have adjustable rates
of  interest  which are indexed to the prime rate as reported in The Wall Street
Journal. Interest rate adjustments on home equity lines of credit are limited to

                                       7


<PAGE>


no more than 5% over the life of the loan. Generally,  the maximum loan-to-value
ratio on home equity lines of credit is 80%. A home equity line of credit may be
drawn  down by the  borrower  for a period of 10 years from the date of the loan
agreement.  During this  period,  the  borrower  has the option of paying,  on a
monthly basis, either principal and interest or only the interest.  The borrower
is required to pay back the amount of  principal  outstanding  under the line of
credit at the end of the 10 year period.

     Newberry  Federal also offers  fixed-rate  second  mortgage  loans and home
equity loans with terms up to 10 years. The  loan-to-value  ratios of fixed-rate
second mortgage loans and home equity loans are generally limited to 80%, taking
into consideration the outstanding balance of the first mortgage loan.

     Newberry  Federal  originates  consumer loans secured by  automobiles  and,
occasionally,  boats and other  recreational  vehicles.  Newberry Federal offers
fixed-rate  automobile  loans with  terms of up to 60 months  and  loan-to-value
ratios of up to 90% for new cars. For used cars, the maximum loan-to-value ratio
is 80% of the lesser of the retail value shown in the NADA Used Car Guide or the
purchase price, and the maximum terms for used automobile loans range from up to
48 to 54 months depending on the age and condition of the automobile.

     Newberry Federal also offers various other consumer loans,  including loans
secured by various  personal  property  and share loans  generally  secured by a
passbook account, a certificate of deposit or marketable securities.  Subject to
market  conditions and its underwriting  standards,  Newberry Federal intends to
increase its consumer  loan  portfolio in the future,  particularly  emphasizing
modular home loans given the demand for such housing in its primary market area.

     Consumer  loans entail  greater risk than do  residential  mortgage  loans,
particularly  in the case of loans  that are  unsecured  or  secured  by rapidly
depreciating  assets such as autos. In these cases,  any repossessed  collateral
for a defaulted consumer loan may not provide an adequate source of repayment of
the  outstanding  loan balance as a result of the greater  likelihood of damage,
loss or  depreciation.  The remaining  deficiency often does not warrant further
substantial   collection   efforts  against  the  borrower  beyond  obtaining  a
deficiency  judgment.  In  addition,  consumer  loan  collections  depend on the
borrower's  continuing financial stability,  and are more likely to be adversely
affected by job loss, divorce, illness or personal bankruptcy.

     Commercial Business Loans. Newberry Federal makes commercial business loans
primarily  in its  primary  market  area to a  variety  of  professionals,  sole
proprietorships  and small  businesses.  Newberry  Federal  offers a variety  of
commercial  lending products,  including term loans for fixed assets and working
capital, revolving lines of credit, and Small Business Administration guaranteed
loans. Commercial business loans are generally offered with fixed interest rates
and with terms of up to five years.  Business  lines of credit  have  adjustable
rates of  interest  and are  payable  on demand,  subject  to annual  review and
renewal.  Business loans with variable rates of interest adjust on a daily basis
and are  generally  indexed to the prime rate as  published  in The Wall  Street
Journal.

     In  making  commercial  business  loans,  Newberry  Federal  considers  the
financial  statements of the borrower,  Newberry  Federal's lending history with
the borrower,  the debt service capabilities of the borrower, the projected cash
flows of the business and the value of the collateral. Commercial business loans
are generally secured by a variety of collateral,  primarily  equipment,  assets
and accounts  receivable,  and are generally  supported by personal  guarantees.
Depending on the collateral used to secure the loans,  commercial business loans
are  made  in  amounts  of up to 50% of the  adjusted  value  of the  collateral
securing the loan although  Newberry  Federal's  policy permits a  loan-to-value
ratio of 65%.  Newberry  Federal  generally does not make  unsecured  commercial
loans.

     Unlike  mortgage  loans,  which  generally  are  made on the  basis  of the
borrower's ability to make repayment from his or her employment or other income,
and which are  secured by real  property  whose  value  tends to be more  easily
ascertainable, commercial loans are of higher risk and typically are made on the
basis of the  borrower's  ability  to make  repayment  from the cash flow of the
borrower's business. As a result, the availability of funds for the repayment of
commercial loans may depend substantially on the success of the business itself.
Further,  any collateral  securing such loans may  depreciate  over time, may be
difficult to appraise and may fluctuate in value.


                                       8


<PAGE>


     Maturity  of  Loan  Portfolio.   The  following   table  presents   certain
information  at September 30, 2001 regarding the dollar amount of loans maturing
in Newberry Federal's  portfolio based on their contractual terms to maturity or
scheduled  amortization,  but does not  include  potential  prepayments.  Demand
loans, loans having no stated schedule of repayments and no stated maturity, and
overdrafts  are  reported as becoming  due within one year.  Loan  balances  are
before  undisbursed  loan  proceeds,  net deferred  loan  origination  costs and
allowance for loan losses.

<TABLE>
<CAPTION>

                                                                             At September 30, 2001
                                           ---------------------------------------------------------------------------------------
                                                        Multi-
                                            One- to   Family and
                                             Four-    Commercial                                                            Total
                                            Family    Real Estate   Construction     Land        Consumer    Commercial     Loans
                                           --------   -----------   ------------ --------------  --------    ----------    -------
                                                                                 (In thousands)
<S>                                        <C>          <C>            <C>          <C>          <C>           <C>         <C>
Amounts due in:
One year or less .....................     $ 1,983      $   13         $2,278       $  276       $ 6,304       $4,390      $15,244
More than one year to three years ....       2,410         263             --           31         4,412        2,321        9,437
More than three years to four years...       1,338         435             --          152         1,324          260        3,509
More than four years to five years....       1,527         544             --           86         1,168          952        4,277
More than five years to 10 years .....       5,547       2,881             --          699           148          699        9,974
More than 10 years to 15 years .......      11,417       2,141             --          363            --           --       13,921
More than 15 years ...................      18,839       2,640             --           --            --           --       21,479
                                           -------      ------         ------       ------       -------       ------      -------
    Total amount due .................     $43,061      $8,917         $2,278       $1,607       $13,356       $8,622      $77,841
                                           =======      ======         ======       ======       =======       ======      =======

</TABLE>


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

                                        Due After September 30, 2002
                                     ---------------------------------
                                      Fixed      Adjustable     Total
                                     -------     ----------    -------
                                               (In thousands)
Real estate loans:
  One- to four-family .........      $ 9,543      $31,535      $41,078
  Multi-family ................           --           47           47
  Commercial ..................        2,163        6,694        8,857
  Construction ................           --           --           --
  Land ........................          446          885        1,331
                                     -------      -------      -------
     Total real estate loans...       12,152       39,161       51,313
Consumer loans ................        5,269        1,783        7,052
Commercial loans ..............        1,337        2,895        4,232
                                     -------      -------      -------
     Total loans ..............      $18,758      $43,839      $62,597
                                     =======      =======      =======


     Loans to One Borrower. The maximum amount that Newberry Federal may lend to
one borrower is limited by regulation. At September 30, 2001, Newberry Federal's
regulatory  limit on loans to one borrower was $5 million,  which equaled 15% of
its Tier 1 capital at that date. At that date, Newberry Federal's largest credit
exposure to one borrower,  including the borrower's related  interests,  totaled
approximately  $3.5 million and consisted of commercial real estate loans. These
loans were performing according to their original terms at September 30, 2001.

     Loan  Approval   Procedures  and  Authority.   Newberry  Federal's  lending
activities follow written,  non-discriminatory,  underwriting standards and loan
origination  procedures established by Newberry Federal's board of directors and
management.


                                       9


<PAGE>


     Newberry Federal's policies and loan approval limits are established by the
Chief  Executive  Officer and the chief lending  officer and are approved by the
board of directors.  For mortgage  loans,  loan  officers,  other than the chief
lending officer may approve a loan up to $50,000.  The chief lending officer and
any two members of the loan  officers'  loan  committee  may approve loans up to
$200,000.  In addition,  loans exceeding $200,000 require review and approval by
the loan  officers' loan committee and at least one member of the executive loan
committee, which currently consists of J. Thomas Johnson, Steve P. Sligh, Robert
W. Owen and James E. Wiseman,  Jr. loans exceeding  $250,000 must be approved by
the executive loan committee. All loans over $500,000 require the prior approval
of the board of directors.

     Loan  Originations,  Purchases and Sales.  Newberry  Federal's primary loan
origination  sources are walk-in customers and referrals.  Newberry Federal does
not have any commissioned loan personnel and does not use loan correspondents or
other  third-party  originators.  Newberry Federal is not an active purchaser of
loans.

     All loans  originated  by  Newberry  Federal are  underwritten  by Newberry
Federal according to policies and procedures  adopted by its board of directors.
Newberry Federal originates both  adjustable-rate and fixed-rate mortgage loans.
Newberry Federal's ability to originate fixed- or adjustable-rate  loans depends
upon the  relative  customer  demand for such  loans,  which is  affected by the
current and expected future level of interest rates.

     In an effort to manage its interest rate risk  position,  Newberry  Federal
generally sells the conforming fixed-rate mortgage loans with terms in excess of
15 years that it originates.  The sale of loans in the secondary mortgage market
reduces Newberry  Federal's risk that the interest rates paid to depositors will
increase  while  Newberry  Federal  holds  long-term,  fixed-rate  loans  in its
portfolio.  It also  allows  Newberry  Federal  to  continue  to fund loans when
savings flows decline or funds are not otherwise available.

     Prior to 2001, when Newberry  Federal sold  residential  mortgage loans, it
generally  retained the servicing  rights.  Servicing loans for others generally
consists  of  collecting   mortgage   payments,   maintaining  escrow  accounts,
disbursing  payments to investors and foreclosure  procedures.  At September 30,
2001,  Newberry  Federal was servicing $2.6 million of loans for others.  Gains,
net of origination expense, from the sale of such loans are recorded at the time
of sale.  Generally a loan is  committed  to be sold and a price for the loan is
fixed  after the loan is  approved  and the  interest  rate is  accepted  by the
customer.  This  eliminates  the risk to Newberry  Federal that a rise in market
interest  rates will  reduce the value of a mortgage  before it can be sold.  In
2001, Newberry Federal began selling  residential  mortgage loans with servicing
released.





                                       10


<PAGE>


     The following table presents total loans originated, sold and repaid during
the periods indicated.

                                                     Year Ended September 30,
                                                  2001        2000        1999
                                                --------    --------    --------
                                                         (In thousands)

Loans at beginning of period .................   $82,783     $76,791     $72,096
 Originations:
   Real estate:
      One- to four-family ....................     6,777       6,140      13,007
      Multi-family ...........................        --          --          --
      Commercial .............................     2,227       4,801       1,142
      Construction ...........................     2,167       1,535       1,373
      Land ...................................       589         823         309
                                                 -------     -------     -------
         Total real estate loans .............    11,760      13,299      15,831

   Consumer:
      Second mortgage loans, home equity loans
         and lines of credit .................     3,199       2,055       2,571
      Automobile .............................     2,214       2,851       2,510
      Education ..............................        15          21          14
      Other ..................................     3,669       4,424       4,255
                                                 -------     -------     -------
         Total consumer loans ................     9,097       9,351       9,350

   Commercial ................................     3,589       4,093       1,798
                                                 -------     -------     -------
         Total loans originated ..............    24,446      26,743      26,979
                                                 -------     -------     -------

Loans purchased ..............................        --          --          --
Deduct:
   Principal loan repayments and prepayments .    16,718      19,018      22,284
   Loan sales ................................    12,670       1,680          --
   Transfers to real estate owned ............        --          53          --
                                                 -------     -------     -------
         Sub-total ...........................    29,388      20,751      22,284
                                                 -------     -------     -------
Net loan activity ............................    (4,942)      5,992       4,695
                                                 -------     -------     -------
   Loans at end of period ....................   $77,841     $82,783     $76,791
                                                 =======     =======     =======


     Loan   Commitments.   Newberry  Federal  issues  loan  commitments  to  its
prospective   borrowers   conditioned  on  the  occurrence  of  certain  events.
Commitments  are made in  writing  on  specified  terms and  conditions  and are
honored for up to 30 days from approval. At September 30, 2001, Newberry Federal
had loan  commitments  and unadvanced  loans and lines of credit  totaling $13.7
million.

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

     Newberry Federal charges loan origination fees for mortgage loans which are
calculated  as a percentage  of the amount  borrowed.  As required by applicable
accounting  principles,  loan origination fees, discount points and certain loan
origination  costs are deferred and recognized  over the  contractual  remaining
lives of the related  loans on a level  yield  basis.  At  September  30,  2001,
Newberry  Federal  had $19,000 of net  deferred  loan  costs.  Newberry  Federal
amortized $85,000 of net deferred loan costs during the year ended September 30,
2001.

     Nonperforming  Assets and  Delinquencies.  All loan payments are due on the
first day of each month.  When a borrower  fails to make a required loan payment
by the 16th day of the month,  Newberry  Federal attempts to cure the deficiency
by contacting the borrower and seeking the payment. In most cases,  deficiencies
are cured promptly. If a delinquency continues beyond the 30th day of the month,
a late notice is mailed and beyond the 60th day of the month, a demand letter is
sent out. While  Newberry  Federal  generally  prefers to work with borrowers to
resolve  problems,  Newberry Federal will refer the loan to an attorney and will
institute  foreclosure or other proceedings after the 90th day of a delinquency,
as necessary, to minimize any potential loss.

                                       11


<PAGE>


     Management  informs the board of  directors  monthly of the amount of loans
delinquent more than 30 days, all loans in  foreclosure,  and all foreclosed and
repossessed property that Newberry Federal owns.

     Newberry Federal ceases accruing  interest on mortgage loans when principal
or  interest  payments  are  delinquent  90 days or more.  Once the  accrual  of
interest on a loan is discontinued,  all interest previously accrued is reversed
against current period interest income once management  determines that interest
is  uncollectible.  No additional  interest is accrued to loan balance until the
collection of both principal and interest becomes reasonably certain.

     The following table presents information with respect to Newberry Federal's
nonperforming assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                       At September 30,
                                                       ------------------------------------------------
                                                       2001       2000       1999       1998       1997
                                                       ----       ----       ----       ----       ----
                                                                    (Dollars in thousands)
<S>                                                    <C>        <C>        <C>        <C>        <C>
Nonaccruing loans:
   One- to four-family real estate ..............      $132       $111       $149       $207       $100
   Multi-family .................................        --         --         --         --         --
   Commercial real estate .......................        --         --         --         --         --
   Construction .................................        --         --         --         --         --
   Land .........................................        --         --         --         --         --
   Consumer .....................................        17         22         14         62         65
                                                       ----       ----       ----       ----       ----
      Total .....................................       149        133        163        269        165
Real estate owned(1) ............................        --         --         --          1          1
Other repossessed assets ........................        --         22         14         18          3
                                                       ----       ----       ----       ----       ----
      Total nonperforming assets(2) .............       149        155        177        288        169
Troubled debt restructurings ....................       310         30         66         96         73
                                                       ----       ----       ----       ----       ----
Troubled debt restructurings and
  total nonperforming assets ....................      $459       $185       $243       $384       $242
                                                       ====       ====       ====       ====       ====
Total nonperforming loans and troubled debt
   restructurings as a percentage of total loans       0.59%      0.20%      0.30%      0.51%      0.35%
Total nonperforming assets and troubled debt
   restructurings as a percentage of total assets      0.18%      0.08%      0.12%      0.21%      0.14%
</TABLE>

----------
(1)  Real estate owned balances are shown net of related loss allowances.
(2)  Nonperforming assets consist of nonperforming loans,  impaired loans, other
     repossessed assets and real estate owned.


     Interest  income that would have been recorded for the year ended September
30, 2001, had nonaccruing  loans been current  according to their original terms
amounted to  approximately  $12,000.  Newberry  Federal  included income on such
loans of $9,000 in total interest income for the year ended September 30, 2001.


                                       12


<PAGE>


     The following tables set forth the delinquencies in Newberry Federal's loan
portfolio as of the dates indicated.

<TABLE>
<CAPTION>
                                                  At September 30,
                                        --------------------------------------
                                                        2001
                                        --------------------------------------
                                           60-89 Days        90 Days or More
                                        -----------------  -------------------
                                        Number  Principal  Number   Principal
                                         of      Balance     of     Balance of
                                        Loans   of Loans   Loans      Loans
                                        ------  ---------  ------   ----------

<S>                                     <C>       <C>      <C>        <C>
Real estate loans:
   One- to four-family ..............     --      $ --        5       $144
   Multi-family .....................     --        --       --         --
   Commercial .......................     --        --       --         --
   Construction .....................     --        --       --         --
   Land .............................     --        --       --         --
Consumer loans:
   Second mortgage loans, home
     equity loans and lines of credit     --        --       --         --
   Automobile .......................      2        20
   Other ............................      9        42       14         32
Commercial loans ....................      1        17        3        146
                                        ----      ----     ----       ----

      Total .........................     12      $ 79       22       $322
                                        ====      ====     ====       ====

Delinquent loans to total loans .....             0.10%               0.41%


<CAPTION>

                                                                      At September 30,
                                        --------------------------------------------------------------------------------
                                                        2000                                       1999
                                        --------------------------------------  ----------------------------------------
                                            60-89 Days       90 Days or More         60-89 Days        90 Days or More
                                        -----------------  ------------------   -------------------  -------------------
                                        Number  Principal  Number  Principal    Number  Principal    Number   Principal
                                         of      Balance    of     Balance of    of     Balance of    of      Balance of
                                        Loans   of Loans   Loans     Loans      Loans     Loans      Loans      Loans
                                        ------  ---------  ------  ----------   ------  ----------   ------   ----------
                                                                    (Dollars in thousands)
<S>                                     <C>       <C>       <C>       <C>        <C>        <C>        <C>        <C>
Real estate loans:
   One- to four-family ..............     20      $518         5      $119         21       $620          8       $149
   Multi-family .....................     --        --        --        --         --         --         --         --
   Commercial .......................      2        24        --        --          4        174         --         --
   Construction .....................     --        --        --        --         --         --         --         --
   Land .............................     --        --        --        --         --         --         --         --
Consumer loans:
   Second mortgage loans, home
     equity loans and lines of credit     --        --        --        --          5         44         --         --
   Automobile .......................     --        --        --        --          5         47         --         --
   Other ............................      4         9         3         5          5         17          4         14
Commercial loans ....................     --        --        --        --          4         68         --         --
                                        ----      ----      ----      ----       ----       ----       ----       ----
      Total .........................     26      $551         8      $124         44       $970         12       $163
                                        ====      ====      ====      ====       ====       ====       ====       ====
Delinquent loans to total loans .....             0.67%               0.15%                 1.26%                 0.20%

</TABLE>


                                       13


<PAGE>


     Real Estate Owned and Other Repossessed  Assets.  Real estate that Newberry
Federal  acquires  through  foreclosure  or by  deed-in-lieu  of  foreclosure is
classified  as real estate  owned until  sold.  When  property is acquired it is
recorded at fair market  value at the date of  foreclosure,  establishing  a new
cost  basis.  Holding  costs and  declines  in fair  value  result in changes to
expense after acquisition are expensed.  At September 30, 2001, Newberry Federal
had no real estate owned.

     Asset  Classification.  Regulators  have adopted  various  regulations  and
practices  regarding  problem  assets  of  savings   institutions.   Under  such
regulations,  federal and state  examiners  have  authority to identify  problem
assets during examinations and, if appropriate, require them to be classified.

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

     The following table sets forth classified assets at September 30, 2001.

<TABLE>
<CAPTION>
                                      Loss                   Doubtful                 Substandard             Special Mention
                             ----------------------    ----------------------    ----------------------    ----------------------
                             Principal    Number of    Principal    Number of    Principal    Number of    Principal    Number of
                              Balance       Loans       Balance       Loans       Balance       Loans       Balance       Loans
                             ---------    ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                                                   (Dollars in thousands)
<S>                           <C>          <C>          <C>           <C>           <C>         <C>          <C>         <C>
Real estate loans:
   One- to four-family ..     $ --           --         $ --            --          $299          11         $ --          --
   Multi-family .........       --           --           --            --            57           1           --          --
   Commercial ...........       --           --           --            --            --          --           --          --
   Construction .........       --           --           --            --            --          --           --          --
   Land .................       --           --           --            --            --          --           --          --
Consumer loans:
   Second mortgage loans,
   home equity loans and
     lines of credit ....       --           --           --            --            24           1           --          --
   Automobile ...........       --           --           --            --            20           2           --          --
   Other ................       --           --           --            --            45          23           --          --
Commercial loans ........       --           --           --            --            96           3           --          --
                              ----         ----         ----          ----          ----        ----         ----        ----
      Total .............     $ --           --         $ --            --          $541          41         $ --          --
                              ====         ====         ====          ====          ====        ====         ====        ====
Delinquent loans to                                                                 0.70%
   total loans ..........       --                        --                        ----                       --

</TABLE>


     Allowance  for  Loan  Losses.  In  originating   loans,   Newberry  Federal
recognizes  that losses will be  experienced  on loans and that the risk of loss
will  vary  with,  among  other  things,  the  type  of  loan  being  made,  the
creditworthiness  of the borrower  over the term of the loan,  general  economic
conditions  and, in the case of a secured loan,  the quality of the security for
the loan.  Newberry  Federal  maintains an  allowance  for loan losses to absorb
losses inherent in the loan portfolio.  The allowance for loan losses represents


                                       14


<PAGE>


management's  estimate of probable  losses based on information  available as of
the date of the financial statements.  The allowance for loan losses is based on
management's  evaluation of the collectibility of the loan portfolio,  including
past loan loss  experience,  known and inherent risks in the portfolio,  adverse
situations that may affect the borrower's  ability to repay, the estimated value
of any underlying collateral, and current economic conditions.

     The loan  portfolio and other credit  exposures  are regularly  reviewed by
management  to evaluate  the  adequacy of the  allowance  for loan  losses.  The
methodology  for  assessing  the   appropriateness  of  the  allowance  includes
comparison to actual losses, peer group comparisons,  industry data and economic
conditions.  In addition,  the regulatory agencies, as an integral part of their
examination  process,  periodically review Newberry Federal's allowance for loan
losses and may  require  Newberry  Federal  to make  additional  provisions  for
estimated losses based upon judgments different from those of management.

     In assessing the allowance for loan losses,  Newberry  Federal applies loss
factors to various pools of outstanding  loans and certain  unused  commitments.
Newberry Federal segregates the loan portfolio according to risk characteristics
(i.e.,  mortgage loans, home equity,  consumer).  Loss factors are derived using
Newberry   Federal's   historical  loss  experience  and  may  be  adjusted  for
significant factors that, in management's judgment, affect the collectibility of
the portfolio as of the evaluation date.

     In addition, management assesses the allowance using factors that cannot be
associated  with  specific  credit or loan  categories.  These  factors  include
management's  subjective  evaluation of local and national economic and business
conditions, portfolio concentration and changes in the character and size of the
loan portfolio.  The allowance methodology reflects management's  objective that
the  overall  allowance  appropriately  reflects  a margin  for the  imprecision
necessarily inherent in estimates of expected credit losses.

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



                                       15


<PAGE>


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

<TABLE>
<CAPTION>
                                                                        Year Ended September 30,
                                                             ------------------------------------------------
                                                             2001       2000       1999       1998       1997
                                                             ----       ----       ----       ----       ----
                                                                          (Dollars in thousands)
<S>                                                          <C>        <C>        <C>        <C>        <C>
Allowance for loan losses, beginning of year ..........      $465       $184       $181       $192       $227
Charged-off loans:
   One- to four-family real estate ....................         3         --          5         16          4
   Multi-family .......................................        --         --         --         --         --
   Commercial real estate .............................        --         --         --         --         --
   Construction .......................................        --         --         --         --         --
   Land ...............................................        --         --          1         --         --
   Commercial .........................................        --         --         --         --         --
   Consumer ...........................................        92        150        161        106        144
                                                             ----       ----       ----       ----       ----
      Total charged-off loans .........................        95        150        167        122        148
Recoveries on loans previously charged off:
   One- to four-family real estate ....................        --         --          1         --         18
   Multi-family .......................................        --         --         --         --         --
   Commercial real estate .............................        --         --         --         --         --
   Construction .......................................        --         --         --         --         --
   Land ...............................................        --         --         --         --         --
   Commercial .........................................        --         --         --         --         --
   Consumer ...........................................        24         91         27         26         24
                                                             ----       ----       ----       ----       ----
      Total recoveries ................................        24         91         28         26         42
Net loans charged-off .................................        71         59        139         96        106
Provision for loan losses .............................       241        340        142         85         70
                                                             ----       ----       ----       ----       ----
Allowance for loan losses, end of period ..............      $635       $465       $184       $181       $191
                                                             ====       ====       ====       ====       ====

Net loans charged-off to average interest-earning loans      0.10%      0.19%      0.18%      0.14%      0.17%
Allowance for loan losses to total loans ..............      0.82%      0.56%      0.24%      0.25%      0.28%
Allowance for loan losses to nonperforming
   loans and troubled debt restructurings .............    138.34%    251.48%     80.79%     49.59%     80.25%
Net loans charged-off to allowance for loan losses ....     11.18%     32.26%     74.59%     52.49%     55.50%
Recoveries to charge-offs .............................     25.26%     60.67%     17.37%     22.13%     28.38%
</TABLE>


                                       16


<PAGE>


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

<TABLE>
<CAPTION>

                                                                 At September 30,
                         ---------------------------------------------------------------------------------------------------
                                    2001                               2000                               1999
                         ------------------------------    -------------------------------    ------------------------------
                                  Percent of   Percent              Percent of    Percent              Percent of   Percent
                                  Allowance    of Loans              Allowance    of Loans              Allowance   of Loans
                                  in each      in Each               in each      in Each               in each     in Each
                                  Category     Category              Category     Category              Category    Category
                                  to Total     to Total              to Total     to Total              to Total    to Total
                         Amount   Allowance     Loans      Amount    Allowance     Loans       Amount   Allowance    Loans
                         ------   ---------    --------    ------   ----------    --------     ------  ----------   --------
                                                               (Dollars in thousands)

<S>                       <C>       <C>         <C>         <C>        <C>         <C>          <C>       <C>         <C>
Real estate ..........    $378      59.53%      71.77%      $140       30.11%      81.94%       $ 85      45.95%      80.61%
Consumer .............     257      40.47       17.15        325       69.89       17.07         100      54.05       16.92
Commercial ...........      --         --          --         --          --          --          --         --          --
                          ----     ------                   ----      ------                    ----     ------
   Total allowance
     for loan losses..    $635     100.00%                  $465      100.00%                   $185     100.00%
                          ====     ======                   ====      ======                    ====     ======
<CAPTION>

                                                    At September 30,
                           ----------------------------------------------------------------
                                      1998                               1997
                           ------------------------------    ------------------------------
                                    Percent of   Percent             Percent of    Percent
                                    Allowance    of Loans             Allowance    of Loans
                                    in each      in Each              in each      in Each
                                    Category     Category             Category     Category
                                    to Total     to Total             to Total     to Total
                           Amount   Allowance     Loans      Amount   Allowance     Loans
                           ------   ---------    --------    ------   ---------    --------
                                                 (Dollars in thousands)

<S>                         <C>       <C>         <C>        <C>      <C>           <C>
Real estate ..........      $118      65.19%      78.15%     $164      85.86%       77.85%
Consumer .............        63      34.81       18.23        27      14.14        19.12
Commercial ...........        --         --          --        --         --           --
                            ----     ------                  ----     ------
   Total allowance          $181     100.00%                 $191     100.00%
     for loan losses..      ====     ======                  ====     ======

</TABLE>

Investment Activities

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

     Because of low loan demand in its primary market area, DutchFork Bancshares
has   maintained  a  significant   investment  in  investment   securities   and
mortgage-backed   securities   classified   as   available-for-sale.   DutchFork
Bancshares'  investment  securities  consist  primarily of U.S.  Government  and
agency obligations.  DutchFork Bancshares' mortgage-backed securities consist of
U.S.  Government  agency  issues as well as  investment  grade  private  issues.
DutchFork Bancshares'  investment and mortgage-backed  securities generally have
average life of less than 15 years.


                                       17

<PAGE>



DutchFork  Bancshares'  investment policy permits  DutchFork  Bancshares to be a
party to financial  instruments with off-balance sheet risk in the normal course
of business in order to manage interest rate risk,  including  interest rate cap
and floor agreements. See Note 14 of the Financial Statements.

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

     DutchFork  Bancshares  maintains a trading  account for certain  classes of
collateralized mortgage obligations. At September 30, 2001, DutchFork Bancshares
had no securities classified as "trading securities."

     All of DutchFork  Bancshares'  investment  and  mortgage-backed  derivative
securities  carry  market risk  insofar as increases in market rates of interest
may  cause a  decrease  in their  market  value,  which  would  lower  DutchFork
Bancshares'  capital  position.  They also carry prepayment risk insofar as they
may be called or repaid before  maturity in times of low market  interest rates,
so that  DutchFork  Bancshares  may have to invest the funds at a lower interest
rate.

     At September 30, 2001, DutchFork Bancshares'  investment in mortgage-backed
derivative securities had an aggregate book value in excess of 349% of DutchFork
Bancshares' retained earnings at that date, with an aggregate book value of $115
million.



                                       18


<PAGE>


     The following table presents the amortized cost and fair value of DutchFork
Bancshares' securities, by type of security, at the dates indicated.

<TABLE>
<CAPTION>
                                                                                At September 30,
                                                    -----------------------------------------------------------------------
                                                            2001                     2000                     1999
                                                    -----------------------------------------------------------------------
                                                    Amortized     Fair      Amortized      Fair      Amortized      Fair
                                                      Cost        Value       Cost         Value        Cost        Value
                                                    ---------   ---------   ---------    ---------   ---------    ---------
                                                                                (In thousands)
<S>                                                 <C>         <C>         <C>          <C>         <C>          <C>
Investment securities:
   Debt securities held-to-maturity:
      Obligations of U.S. government agencies ...    $     --    $     --    $     --     $     --    $     --     $     --
      Other securities ..........................          --          --       1,091        1,091       1,091        1,091
                                                     --------    --------    --------     --------   ---------     --------
            Total ...............................          --          --       1,091        1,091       1,091        1,091

   Debt securities available-for-sale:
      Obligations of U.S. Treasury and U.S.
        government agencies .....................      11,819      11,745      24,414       21,885      21,487       19,111
      Other securities ..........................          --          --          --           --          --           --
                                                     --------    --------    --------     --------    --------     --------
            Total ...............................      11,819      11,745      24,414       21,885      21,487       19,111

   Equity securities available-for-sale:
      Federal Home Loan Bank stock ..............       3,000       3,000       1,882        1,882       1,962        1,962
      Mutual funds ..............................         982         876       1,061          915       1,057          914
      Preferred stock ...........................      33,468      33,817          --           --          --           --
      Other securities ..........................          71         122          72           91          72           80
                                                     --------    --------    --------     --------    --------     --------
        Total ...................................      37,521      37,815       3,015        2,888       3,091        2,956

   Equity securities held-to-maturity:
      Other securities ..........................          50          50          50           50          50           50

            Total debt and equity securities ....      49,390      49,610      28,570       25,914      25,719       23,208
                                                     --------    --------    --------     --------    --------     --------

Mortgage-backed securities:
   Mortgage-backed securities held-to-maturity:
      FHLMC .....................................       2,356       2,349       2,645        2,282       2,977        2,858
      FNMA ......................................       1,018       1,030       1,230        1,211       1,489        1,482
                                                     --------    --------    --------     --------    --------     --------
          Total mortgage-backed securities
              held-to-maturity ..................       3,374       3,379       3,875        3,493       4,466        4,340
                                                     --------    --------    --------     --------    --------     --------

   Mortgage-backed securities available-for-sale:
      FHLMC .....................................      72,514      72,603      36,223       34,921      34,445       33,899
      FNMA ......................................      21,919      21,199      40,707       39,124      30,509       28,863
      GNMA ......................................       8,988       9,362       9,626        9,495      11,839       11,589
      Private issues ............................       8,353       8,525      23,547       22,425      23,786       22,534
                                                     --------    --------    --------     --------    --------     --------
        Total mortgage-backed securities
         available-for-sale......................     111,774     111,689     110,103      105,965     100,579       96,885
                                                     --------    --------    --------     --------    --------     --------
         Net unrealized (losses) gains on
          available-for-sale securities   .......         135          --      (6,795)          --      (6,204)          --
                                                     --------    --------    --------     --------    --------     --------

            Total securities ....................    $164,673    $164,678    $135,753     $135,372    $124,560     $124,433
                                                     ========    ========    ========     ========    ========     ========
</TABLE>


                                       19


<PAGE>


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

<TABLE>
<CAPTION>
                                                                            Year Ended September 30,
                                                                    ----------------------------------------
                                                                      2001            2000            1999
                                                                    --------        --------        --------
                                                                                 (In thousands)

<S>                                                                <C>             <C>             <C>
Mortgage-backed securities:
   Mortgage-backed securities, beginning of period (1) ......       $109,840        $101,351        $ 91,971

   Purchases:
      Mortgage-backed securities - held-to-maturity ...........           --              --              --
      Mortgage-backed securities - available-for-sale .........      161,101          48,233         102,695

   Sales:
      Mortgage-backed securities - available-for-sale .........     (105,415)        (25,380)        (55,720)

   Repayments and prepayments:
      Mortgage-backed securities ..............................      (55,339)        (14,215)        (35,230)
   Increase (decrease) in net premium .........................          825             294             183
   Increase (decrease) in unrealized gain .....................        4,051            (443)         (2,548)
                                                                    --------        --------        --------
                                                                       5,223           8,489           9,380
                                                                    --------        --------        --------
        Net increase (decrease) in mortgage-backed securities
   Mortgage-backed securities, end of period .................      $115,063        $109,840        $101,351
                                                                    ========        ========        ========
Investment securities:
   Investment securities, beginning of period (2)..............     $ 25,914        $ 23,209        $  7,888

   Purchases:
      Investment securities - held-to-maturity ................           --              --           1,141
      Investment securities - available-for-sale ..............       55,041           2,313          22,562
      Investment securities - trading .........................        1,000           3,336              --

   Sales:
      Investment securities - available-for-sale ..............      (34,842)           (275)         (4,892)
      Investment securities - trading .........................       (1,002)         (3,336)             --

   Calls:
      Investment securities - held-to-maturity ................           --              --          (1,352)
      Investment securities - available-for-sale ..............           --              --              --

   Maturities:
      Investment securities - held-to-maturity ................           --              --              --
      Investment securities - available-for-sale ..............           --              --              --
      Increase (decrease) in net premium ......................          622             814             283
      Increase (decrease) in unrealized gain ..................        2,878            (147)         (2,421)
                                                                    --------        --------        --------
          Net increase (decrease) in investment securities            23,697           2,705          15,321
                                                                    --------        --------        --------
      Investment securities, end of period.....................     $ 49,611        $ 25,914        $ 23,209
                                                                    ========        ========        ========
</TABLE>

----------
(1)  Includes mortgage-backed securities available-for-sale.
(2)  Includes investment securities available-for-sale.


                                       20


<PAGE>


     The following  table presents  certain  information  regarding the carrying
value,  weighted  average  yields and  maturities  or periods  to  repricing  of
Newberry Federal's debt securities at September 30, 2001.

<TABLE>
<CAPTION>
                                                           At September 30, 2001
                                      -----------------------------------------------------------------
                                                                 More than              More than
                                            One Year             One Year to           Five Years to
                                            or Less              Five Years              Ten Years
                                      -------------------    --------------------   -------------------
                                                 Weighted                Weighted              Weighted
                                      Carrying   Average     Carrying    Average    Carrying    Average
                                       Value      Yield        Value      Yield       Value      Yield
                                      --------   --------    --------    --------   --------   --------
                                                            (Dollars in thousands)


<S>                                    <C>          <C>       <C>           <C>       <C>        <C>
Held-to-maturity securities:
 Investment securities:
   Municipal securities (1) .......     $--         --%        $--          --%       $ --         --%
   Obligations of U.S. ............
      Government agencies .........      --         --          --          --          --         --
   Mortgage-backed securities .....      --         --          --          --          --         --
                                        ---        ---         ---         ---        ----       ----
      Total securities at
         amortized cost  ..........     $--         --%        $--          --%       $ --         --%
                                        ===        ===         ===         ===        ====       ====

Available-for-sale securities:
 Investment securities:
   Obligations of U.S. Treasury ...     $--         --%        $--          --%       $ --         --%
   Obligations of U.S. ............      --         --          --          --          --         --
      Government agencies .........
   Equity securities ..............      --         --          --          --          --         --
   Mutual funds ...................      --         --          --          --          --         --
Mortgage-backed securities ........      --         --          --          --         997       3.98
                                        ---        ---         ---         ---        ----       ----
     Total securities at fair value     $--         --%        $--          --%       $997       3.98%
                                        ===        ===         ===         ===        ====       ====
</TABLE>

                                                  At September 30, 2001
                                      ------------------------------------------
                                           More than
                                           Ten Years                Totals
                                      -------------------    -------------------
                                                 Weighted               Weighted
                                      Carrying   Average     Carrying    Average
                                       Value      Yield       Value       Yield
                                      --------   --------    --------   -------
                                                 (Dollars in thousands)
Held-to-maturity securities:
 Investment securities:
   Municipal securities (1) .......   $     --       --%    $     --        --%
   Obligations of U.S. ............
      Government agencies .........         --       --           --        --
   Mortgage-backed securities .....      3,374     6.00%       3,374      6.00%
                                      --------     ----     --------      ----
      Total securities at
         amortized cost ...........   $  3,374     6.00%    $  3,374      6.00%
                                      ========     ====     ========      ====

Available-for-sale securities:
 Investment securities:
   Obligations of U.S. Treasury ...   $     --       --%    $     --        --%
   Obligations of U.S. ............     11,745     7.08       11,745      7.08%
      Government agencies
   Equity securities ..............     36,939     6.75       36,939      6.75
   Mutual funds ...................        876     5.39          876      5.39
 Mortgage-backed securities ........    105,837    4.54      106,834      4.54
                                      --------     ----     --------      ----

     Total securities at fair value   $155,397     5.33%    $156,394      5.32%
                                      ========     ====     ========      ====

----------
(1)  Weighted average yield data for municipal  securities is presented on a tax
     equivalent basis assuming a combined federal and state tax rate of 38%.


                                       21


<PAGE>


Deposit Activities and Other Sources of Funds

     General.  Deposits  are the major  external  source  of funds for  Newberry
Federal's lending and other investment activities. In addition, Newberry Federal
also generates funds  internally from loan principal  repayments and prepayments
and maturing investment  securities.  Scheduled loan repayments are a relatively
stable source of funds,  while deposit inflows and outflows and loan prepayments
are  influenced  significantly  by  general  interest  rates  and  money  market
conditions.  Newberry Federal may use borrowings from the Federal Home Loan Bank
of Atlanta to compensate for reductions in the  availability of funds from other
sources.

     Deposit  Accounts.  Nearly all of Newberry  Federal's  depositors reside in
South Carolina.  Newberry Federal offers a wide variety of deposit accounts with
a range of interest rates and terms. Newberry Federal's deposit accounts consist
of  interest-bearing  checking,  noninterest-bearing  checking,  various savings
accounts,  money market savings and  certificates of deposit.  The maturities of
Newberry  Federal's  certificate of deposit  accounts range from three months to
five years. In addition, Newberry Federal offers retirement accounts,  including
IRAs,  Keogh accounts and  simplified  employee  pension plan accounts.  Deposit
account  terms vary with the  principal  differences  being the minimum  balance
deposit,  early withdrawal  penalties,  limits on the number of transactions and
the interest rate. Newberry Federal reviews its deposit mix and pricing weekly.

     Newberry Federal believes it is competitive in the interest rates it offers
on its deposit products.  Newberry Federal  determines the rates paid based on a
number of factors, including rates paid by competitors,  Newberry Federal's need
for funds and cost of funds,  borrowing  costs and movements of market  interest
rates. Newberry Federal does not use brokers to obtain deposits and at September
30, 2001 had no brokered deposits.

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

     The following table presents the deposit  activity of Newberry  Federal for
the periods indicated.

                                                   Year Ended September 30,
                                              ----------------------------------
                                                 2001        2000        1999
                                              ----------------------------------
                                                       (In thousands)

Beginning balance ..........................   $147,730    $137,537    $141,702
Increase (decrease) before interest credited     (7,100)      3,347     (10,155)
Interest credited ..........................      6,628       6,846       5,990
                                               --------    --------    --------
Net increase (decrease) ....................       (472)     10,193      (4,165)
                                               --------    --------    --------
Ending balance .............................   $147,258    $147,730    $137,537
                                               ========    ========    ========


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

                                            Weighted
       Maturity                              Average
        Period                 Amount         Rate
-------------------------     -------       --------
                           (In thousands)

Three months or less ....     $ 8,957         5.08%
Over 3 through 6 months..       6,956         4.83
Over 6 through 12 months.      13,039         4.84
Over 12 months ..........       1,361         5.74
                              -------         ----
      Total .............     $30,313         4.95%
                              =======         ====


                                       22


<PAGE>


     The following table presents  information  concerning  average balances and
rates paid on Newberry Federal's deposit accounts for the periods indicated.


<PAGE>

<TABLE>
<CAPTION>

                                                            For the Year Ended September 30,
                                  ------------------------------------------------------------------------------------------------
                                         2001                            2000                                  1999
                                  ------------------  -------------------------------------------   ------------------------------
                                            Percent                          Percent                          Percent
                                              of      Weighted                  of       Weighted                of       Weighted
                                  Average    Total    Average     Average     Total      Average    Average    Total      Average
                                  Balance   Deposits    Rate      Balance    Deposits      Rate     Balance   Deposits      Rate
                                  -------   --------  -------     -------    --------    --------   --------  --------    --------
                                                                      (Dollars in thousands)
<S>                              <C>          <C>       <C>      <C>          <C>           <C>     <C>         <C>         <C>

Savings accounts ...........     $ 13,969     9.94%     2.25%    $ 17,177     11.38%        2.79%   $ 17,588    12.61%      2.80%
NOW and money market
   accounts ................       30,538    21.73      1.24       31,652     20.97         2.24      26,632    19.10       2.06
Certificates of deposit(1)..       96,025    68.33      4.90      102,092     67.65         6.06      95,220    68.29       5.20
                                 --------   ------               --------    ------                 --------   ------
    Total average deposits..     $140,532   100.00%              $150,921    100.00%                $139,440   100.00%
                                 ========   ======               ========    ======                 ========   ======
</TABLE>

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

(1)  Based on remaining maturity of certificates of deposit.



               Certificates of Deposit by Rates and Maturities. The following
table presents the amount of certificates of deposits in Newberry Federal
categorized by rates and maturities at the dates indicated.

<TABLE>
<CAPTION>

                                                    Period to Maturity from September 30, 2001
                                      -------------------------------------------------------------------
                                                                   Over
                                        Less          One           Two           Over
                                      than One       to Two       to Three       Three
                                        Year         Years         Years         Years         Total
                                      --------      --------      --------      --------      --------
                                                           (Dollars in thousands)
<S>                                   <C>           <C>           <C>           <C>           <C>
Certificates of deposit:
   0 to 2.00% .....................    $    --       $    --       $    --       $    --      $     --
   2.01 to 4.00% ..................     20,461           396            12            --        20,869
   4.01 to 5.00% ..................     34,687         2,237         1,424           258        38,606
   5.01 to 6.00% ..................     29,971           948           260            15        31,194
   6.01 to 7.00% ..................      8,314         1,097            --            23         9,434
   7.01 to 8.00% ..................        372            30            --           111           513
   8.01 to 9.00% ..................         --            --            --            --            --
                                       -------       -------       -------       -------      --------

    Total certificates of deposit..    $93,805       $ 4,708       $ 1,696       $   407      $100,616
                                       =======       =======       =======       =======      ========
</TABLE>


         Borrowings. Newberry Federal may borrow from the Federal Home Loan Bank
of  Atlanta  to  supplement  its supply of  lendable  funds and to meet  deposit
withdrawal  requirements.  The Federal Home Loan Bank of Atlanta  functions as a
central  reserve  bank,  providing  credit for savings  banks and certain  other
member  financial  institutions.  As a member of the  Federal  Home Loan Bank of
Atlanta,  Newberry  Federal is required to own capital stock in the Federal Home
Loan Bank of Atlanta and may borrow on the  security  of the  capital  stock and
certain of its mortgage loans and other assets,  principally securities that are
obligations of, or guaranteed by, the U.S. Government or its agencies,  provided
certain  creditworthiness  standards  have been  met.  Advances  are made  under
several different credit programs. Each credit program has its own interest rate
and range of maturities.  Depending on the program, limitations on the amount of
advances are based on the financial  condition of the member institution and the
adequacy of  collateral  pledged to secure the credit.  At  September  30, 2001,
Newberry Federal had the ability to borrow up to approximately  $60 million from
the Federal Home Loan Bank of Atlanta.  At September 30, 2001,  Newberry Federal
had outstanding advances of $60.0 million.

                                       23

<PAGE>


         At September 30, 2001, Newberry Federal also maintained an $7.0 million
unsecured credit facility with a third party financial institution. At September
30,  2001,  Newberry  Federal  had no  outstanding  balance  under  this  credit
facility.

         The following tables presents certain  information  regarding  Newberry
Federal's use of Federal Home Loan Bank of Atlanta advances and other borrowings
(excluding the liability for certain security  financing of $4.8 million) during
the periods and at the dates indicated.

<TABLE>
<CAPTION>
                                                        At or For the Year Ended September 30,
                                                         -----------------------------------
                                                          2001          2000          1999
                                                         -------       -------       -------
                                                                (Dollars in thousands)
<S>                                                      <C>           <C>           <C>
Federal Home Loan Bank advances:
   Average balance outstanding ......................    $46,164       $32,423       $24,944
   Maximum amount outstanding at any month-end
      during the period .............................     60,000        37,640        39,240
   Balance outstanding at end of period .............     60,000        35,000        39,240
   Weighted average interest rate during the period..       4.98%         5.98%         5.58%
   Weighted average interest rate at end of period...       4.44%         5.73%         5.65%

Other borrowings:
   Average balance outstanding ......................    $ 1,034       $ 3,517       $ 2,120
   Maximum amount outstanding at any month-end
      during the period .............................      3,490         7,310         7,370
   Balance outstanding at end of period .............         --         2,755         7,370
   Weighted average interest rate during the period..       4.84%         6.00%         4.95%
   Weighted average interest rate at end of period ..         --          6.90%         5.50%
</TABLE>


Subsidiary Activities

         DutchFork  Bancshares'  sole subsidiary is Newberry  Federal.  Newberry
Federal has one wholly owned subsidiary, Inter-Community Service Corporation, 30
acres  of   residential   land  for   development.   At   September   30,  2001,
Inter-Community Service Corporation's assets totaled approximately $446,000.

Personnel

         As of  September  30,  2001,  DutchFork  Bancshares  had  42  full-time
employees  and  4  part-time  employees,  none  of  whom  are  represented  by a
collective  bargaining unit. DutchFork Bancshares believes its relationship with
its employees is good.

REGULATION AND SUPERVISION
General

As a savings and loan holding company, DutchFork Bancshares is
required by federal law to file reports with, and otherwise comply with, the
rules and regulations of the Office of Thrift Supervision. Newberry Federal is
subject to extensive regulation, examination and supervision by the Office of
Thrift Supervision, as its primary federal regulator, and the Federal Deposit
Insurance Corporation, as the deposit insurer. Newberry Federal is a member of
the Federal Home Loan Bank System and, with respect to deposit insurance, of the
Savings Association Insurance Fund managed by the Federal Deposit Insurance
Corporation. Newberry Federal must file reports with the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation concerning its
activities and financial condition in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with, or
acquisitions of, other savings institutions. The Office of Thrift Supervision
and/or the Federal Deposit Insurance Corporation conduct periodic examinations
to test Newberry Federal's safety and soundness and compliance with various
regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion

                                       24

<PAGE>

in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulatory requirements and policies, whether by the Office of
Thrift Supervision, the Federal Deposit Insurance Corporation or the Congress,
could have a material adverse impact on DutchFork Bancshares, Newberry Federal
and their operations. Certain of the regulatory requirements applicable to
Newberry Federal and to DutchFork Bancshares are referred to below or elsewhere
herein. The description of statutory provisions and regulations applicable to
savings institutions and their holding companies set forth in this Form 10-KSB
does not purport to be a complete description of such statutes and regulations
and their effects on Newberry Federal and DutchFork Bancshares.

Holding Company Regulation

         DutchFork  Bancshares  is a unitary  savings and loan  holding  company
under federal law because Newberry Federal is its only insured subsidiary. Under
prior  law,  a unitary  savings  and loan  holding  company,  such as  DutchFork
Bancshares was not generally  restricted as to the types of business  activities
in which it could  engage,  provided  that its  subsidiary  savings  association
continued to be a qualified thrift lender.  See "--Federal  Savings  Institution
Regulation--Qualified  Thrift Lender Test." The  Gramm-Leach-Bliley  Act of 1999
provides that no company may acquire control of a savings  association after May
4,  1999  unless it  engages  only in the  financial  activities  permitted  for
financial holding companies as described below. Further, the  Gramm-Leach-Bliley
Act specifies that existing  savings and loan holding  companies may only engage
in such activities.  The  Gramm-Leach-Bliley  Act,  however,  grandfathered  the
unrestricted  authority for activities  with respect to unitary savings and loan
holding  companies  existing  prior to May 4, 1999,  so long as the  association
continues to comply with the QTL Test. DutchFork Bancshares does not qualify for
the  grandfather  and is limited to such  activities.  If  DutchFork  Bancshares
acquires  another  savings  institution  or  savings  bank that is not a problem
institution,  that meets the qualified thrift lender test and that the Office of
Thrift Supervision  considers to be a savings institution,  DutchFork Bancshares
would  become a  multiple  savings  and loan  holding  company  if the  acquired
institution  is held as a  separate  subsidiary  and not  merged  into  Newberry
Federal.  As a multiple savings and loan holding company,  DutchFork  Bancshares
would generally be limited to activities  permissible for bank holding companies
under Section  4(c)(8) of the Association  Holding  Company Act,  subject to the
prior approval of the Office of Thrift  Supervision,  and to certain  activities
authorized by Office of Thrift Supervision regulation.

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

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

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

         Acquisition  of the Holding  Company.  Under the Federal Change in Bank
Control Act, a notice must be submitted to the Office of Thrift  Supervision  if
any person (including a company),  or group acting in concert,  seeks to acquire
10% or more of the DutchFork  Bancshares'  outstanding voting stock,  unless the
Office of Thrift Supervision has found that the acquisition will not result in a
change of control of the DutchFork Bancshares.  Under the Federal

                                       25

<PAGE>

Change in Bank Control Act,  the Office of Thrift  Supervision  has 60 days from
the  filing of a  complete  notice to act,  taking  into  consideration  certain
factors,  including the financial and  managerial  resources of the acquirer and
the anti-trust effects of the acquisition.  Any company that so acquires control
would then be subject to regulation as a savings and loan holding company.


Federal Savings Institution Regulation

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

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

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

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

         The following table presents  Newberry  Federal's  capital  position at
September 30, 2001.

                                                                  Capital
                                                            --------------------
                     Actual      Required      Excess       Actual     Required
                     Capital      Capital      Amount       Percent    Percent
                     -------      -------     --------      -------    --------
                                 (Dollars in thousands)

Tangible ......      $33,540      $ 4,986      $28,554      13.45%      2.00%
Core (Leverage)       33,540        9,972       23,568      13.45       4.00
Risk-based ....       34,102       10,148       23,954      26.88       8.00


                                       26

<PAGE>


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

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

         In addition to the assessment for deposit  insurance,  institutions are
required  to make  payments on bonds  issued in the late 1980s by the  Financing
Corporation  ("FICO") to recapitalize the predecessor to the Savings Association
Insurance  Fund.  During 1999, FICO payments for Savings  Association  Insurance
Fund members approximated 6.1 basis points.

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

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

         Loans to One Borrower.  Federal law provides that savings  institutions
are  generally  subject to the  limits on loans to one  borrower  applicable  to
national banks. A savings  institution may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of its unimpaired  capital
and  surplus.  An  additional  amount  may be lent,  equal to 10% of  unimpaired
capital and surplus, if secured by specified  readily-marketable  collateral. At
September  30, 2001,  Newberry  Federal's  limit on loans to one borrower was $5
million,  and Newberry Federal's largest aggregate  outstanding balance of loans
to one borrower was $3.5 million.

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

                                       27

<PAGE>

         A savings  institution  that fails the qualified  thrift lender test is
subject to certain  operating  restrictions  and may be required to convert to a
bank charter.  As of September 30, 2001, Newberry Federal maintained 100% of its
portfolio  assets  in  qualified  thrift  investments  and,  therefore,  met the
qualified  thrift  lender test.  Recent  legislation  has expanded the extent to
which  education  loans,  credit  card  loans  and small  business  loans may be
considered "qualified thrift investments."

         Limitation  on  Capital  Distributions.  Office of  Thrift  Supervision
regulations  impose  limitations  upon all  capital  distributions  by a savings
institution,  including  cash  dividends,  payments to repurchase its shares and
payments  to  stockholders  of  another  institution  in a cash_out  merger.  An
application  to and the prior  approval of the Office of Thrift  Supervision  is
required prior to any capital  distribution if the institution does not meet the
criteria  for  "expedited  treatment"  of  applications  under  Office of Thrift
Supervision  regulations (i.e.,  generally,  examination  ratings in the two top
categories),  the total capital  distributions  for the calendar year exceed net
income for that year plus the amount of  retained  net income for the  preceding
two years, the institution would be undercapitalized  following the distribution
or the  distribution  would  otherwise be contrary to a statute,  regulation  or
agreement with Office of Thrift Supervision.  If an application is not required,
the institution must still provide prior notice to Office of Thrift  Supervision
of the capital  distribution if, like Newberry Federal,  it is a subsidiary of a
holding  company.  In the  event  Newberry  Federal's  capital  fell  below  its
regulatory  requirements or the Office of Thrift Supervision notified it that it
was in need of more than normal supervision,  Newberry Federal's ability to make
capital  distributions  could be restricted.  In addition,  the Office of Thrift
Supervision  could prohibit a proposed capital  distribution by any institution,
which would  otherwise be permitted by the  regulation,  if the Office of Thrift
Supervision  determines  that such  distribution  would  constitute an unsafe or
unsound practice.

         Liquidity.  During 2001,  Newberry  Federal was 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  short-term   borrowings.   This  liquidity   requirement  was  4%.  Recent
legislation  eliminated  the  statutory  liquidity  requirement,  but retained a
provision requiring the maintenance of sufficient  liquidity to ensure a savings
association's safe and sound operation.

         Assessments.  Savings  institutions  are required to pay assessments to
the Office of Thrift  Supervision to fund the agency's  operations.  The general
assessments,  paid  on a  semi-annual  basis,  are  computed  upon  the  savings
institution's total assets, including consolidated subsidiaries,  as reported in
Newberry  Federal's latest quarterly  thrift financial  report.  The assessments
paid by Newberry  Federal for the fiscal year ended  September  30, 2001 totaled
$56,000.

         Transactions  with Related  Parties.  Newberry  Federal's  authority to
engage in transactions with "affiliates"  (e.g., any company that controls or is
under common control with an institution, including DutchFork Bancshares and its
non_savings  institution  subsidiaries) is limited by federal law. The aggregate
amount of covered  transactions with any individual  affiliate is limited to 10%
of the capital and surplus of the savings  institution.  The aggregate amount of
covered  transactions  with all  affiliates  is  limited  to 20% of the  savings
institution's  capital and surplus.  Certain  transactions  with  affiliates are
required to be secured by  collateral  in an amount and of a type  described  in
federal  law. The purchase of low quality  assets from  affiliates  is generally
prohibited.  The  transactions  with  affiliates  must  be on  terms  and  under
circumstances,  that are at  least  as  favorable  to the  institution  as those
prevailing  at  the  time  for  comparable   transactions  with   non-affiliated
companies. In addition,  savings institutions are prohibited from lending to any
affiliate  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.

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

         Enforcement.  The Office of Thrift Supervision has primary  enforcement
responsibility over savings  institutions and has the authority to bring actions
against the institution and all institution affiliated parties, including

                                       28

<PAGE>

stockholders,  and any attorneys,  appraisers and  accountants  who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution.  Formal enforcement action may range from the issuance of a
capital  directive  or cease and  desist  order to removal  of  officers  and/or
directors to  institution  of  receivership,  conservatorship  or termination of
deposit  insurance.  Civil  penalties  cover a wide range of violations  and can
amount to $25,000 per day, or even $1.0 million per day in especially  egregious
cases. The Federal Deposit Insurance  Corporation has the authority to recommend
to the Director of the Office of Thrift  Supervision that enforcement  action to
be taken with  respect to a  particular  savings  institution.  If action is not
taken by the Director,  the Federal Deposit Insurance  Corporation has authority
to take such action under certain  circumstances.  Federal law also  establishes
criminal penalties for certain violations.

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

Federal Home Loan Bank System

         Newberry  Federal  is a member of the  Federal  Home Loan Bank  System,
which  consists of 12 regional  Federal  Home Loan Banks.  The Federal Home Loan
Bank  provides a central  credit  facility  primarily  for member  institutions.
Newberry  Federal,  as a member of the  Federal  Home Loan Bank,  is required to
acquire and hold shares of capital  stock in that  Federal  Home Loan Bank in an
amount at least equal to 1.0% of the  aggregate  principal  amount of its unpaid
residential  mortgage  loans and similar  obligations  at the  beginning of each
year,  or 1/20 of its  advances  (borrowings)  from the Federal  Home Loan Bank,
whichever is greater.  Newberry  Federal was in compliance with this requirement
with an  investment in Federal Home Loan Bank stock of $3.0 million at September
30, 2001.

         The  Federal  Home Loan Banks are  required  to  provide  funds for the
resolution of insolvent  thrifts in the late 1980s and to  contribute  funds for
affordable  housing  programs.  These  requirements  could  reduce the amount of
dividends  that the Federal Home Loan Banks pay to their  members and could also
result in the  Federal  Home Loan Banks  imposing a higher  rate of  interest on
advances to their  members.  If dividends  were  reduced,  or interest on future
Federal  Home Loan Bank  advances  increased,  Newberry  Federal's  net interest
income  would  likely  also be  reduced.  Recent  legislation  has  changed  the
structure  of the Federal  Home Loan Banks  funding  obligations  for  insolvent
thrifts,  revised  the  capital  structure  of the  Federal  Home Loan Banks and
implemented   entirely  voluntary   membership  for  Federal  Home  Loan  Banks.
Management cannot predict the effect that these changes may have with respect to
its Federal Home Loan Bank membership.

Federal Reserve System

         The Federal Reserve Board regulations  require savings  institutions to
maintain  non_interest  earning  reserves  against  their  transaction  accounts
(primarily NOW and regular checking accounts). The regulations generally provide
that reserves be maintained against aggregate transaction accounts as follows: a
3% reserve  ratio is assessed on net  transaction  accounts over $5.7 million to
and including  $41.3  million;  a 10% reserve ratio is applied above $41.3.  The
first $5.7 million of otherwise  reservable  balances (subject to adjustments by
the Federal Reserve Board) are exempted from the reserve requirements.  Newberry
Federal complies with the foregoing requirements.

Community Reinvestment Act

         Under the  Community  Reinvestment  Act,  as  implemented  by Office of
Thrift  Supervision  regulations,  a savings  association  has a continuing  and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire  community,  including  low and  moderate  income
neighborhoods.  The  Community  Reinvestment  Act  does not  establish  specific
lending requirements or programs for financial institutions nor does it limit an
institution's  discretion  to develop the types of products and services that it
believes  are best  suited  to its  particular  community,  consistent  with the
Community  Reinvestment Act. The Community  Reinvestment Act requires the Office
of Thrift Supervision,  in connection with its examination of an institution, to
assess the institution's record of meeting the credit needs of its community and
to take such record  into  account in its  evaluation  of  applications  by such

                                       29

<PAGE>

institution.  The Community  Reinvestment  Act requires public  disclosure of an
institution's  Community  Reinvestment  Act rating.  Newberry  Federal's  latest
Community   Reinvestment  Act  rating,   received  from  the  Office  of  Thrift
Supervision was "Satisfactory."


                           FEDERAL AND STATE TAXATION

Federal Taxation

         General.  DutchFork Bancshares and Newberry Federal report their income
on a fiscal year, consolidated basis under the accrual method of accounting, and
are subject to federal income taxation in the same manner as other  corporations
with some exceptions,  including particularly Newberry Federal's reserve for bad
debts discussed below. The following  discussion of tax matters is intended only
as a summary and does not purport to be a  comprehensive  description of the tax
rules  applicable  to DutchFork  Bancshares  or Newberry  Federal.  For its 2001
taxable year,  DutchFork  Bancshares is subject to a maximum  federal income tax
rate of 35%.

         Bad Debt  Reserves.  For fiscal years  beginning  prior to December 31,
1995, thrift  institutions which qualified under certain  definitional tests and
other  conditions  of the Internal  Revenue  Code were  permitted to use certain
favorable  provisions  to calculate  their  deductions  from taxable  income for
annual  additions to their bad debt reserve.  A reserve could be established for
bad debts on qualifying real property loans  (generally  secured by interests in
real property  improved or to be improved)  under (i) the  percentage of taxable
income method or (ii) the experience method. The reserve for nonqualifying loans
was computed using the experience method.

         Congress  repealed the reserve  method of accounting  for bad debts for
tax years  beginning after 1995 and required  savings  institutions to recapture
(i.e.,  take  into  income)  certain  portions  of  their  accumulated  bad debt
reserves. Thrift institutions eligible to be treated as "small banks" (assets of
$500 million or less) are allowed to use the  experience  method  applicable  to
such  institutions,  while thrift  institutions  that are treated as large banks
(assets exceeding $500 million) are required to use only the specific charge-off
method.  Thus,  the  percentage of taxable  income method of accounting  for bad
debts is no longer available for any financial institution.

         A thrift  institution  required  to  change  its  method  of  computing
reserves  for bad  debts  will  treat  such  change  as a change  in  method  of
accounting,  initiated by the taxpayer, and having been made with the consent of
the Internal Revenue Service. Any Section 481(a) adjustment required to be taken
into income  with  respect to such  change  generally  will be taken into income
ratably over a six-taxable  year period,  beginning  with the first taxable year
beginning after 1995,  subject to a 2-year  suspension if the "residential  loan
requirement" is satisfied.

         Under  the  residential  loan  requirement   provision,   the  required
recapture will be suspended for each of two successive taxable years,  beginning
with Newberry  Federal's 1996 taxable year, in which Newberry Federal originates
a minimum of certain  residential  loans based upon the average of the principal
amounts of such loans made by  Newberry  Federal  during its six  taxable  years
preceding its current taxable year.

         Distributions.  If Newberry Federal makes "non-dividend  distributions"
to DutchFork Bancshares, such distributions will be considered to have been made
from  Newberry  Federal's  unrecaptured  tax bad debt  reserves  (including  the
balance of its reserves as of December 31, 1987) to the extent thereof, and then
from Newberry Federal's  supplemental reserve for losses on loans, to the extent
thereof, and an amount based on the amount distributed (but not in excess of the
amount  of such  reserves)  will  be  included  in  Newberry  Federal's  income.
Non-dividend distributions include distributions in excess of Newberry Federal's
current and accumulated  earnings and profits,  as calculated for federal income
tax purposes, distributions in redemption of stock, and distributions in partial
or complete  liquidation.  Dividends paid out of Newberry  Federal's  current or
accumulated earnings and profits will not be so included in its income.

         The amount of additional  taxable income triggered by a non-dividend is
an amount that, when reduced by the tax attributable to the income,  is equal to
the amount of the  distribution.  Thus, if Newberry Federal makes a non-dividend
distribution to DutchFork  Bancshares,  approximately one and one-half times the
amount of such  distribution  (but not in excess of the amount of such reserves)
would be  includable in income for federal  income tax purposes,  assuming a 35%

                                       30

<PAGE>

federal  corporate  income  tax rate.  Newberry  Federal  does not intend to pay
dividends  that  would  result in a  recapture  of any  portion  of its bad debt
reserves.

State Taxation

         South  Carolina  Taxation.  South  Carolina  has adopted  the  Internal
Revenue  Code,  with  certain  modifications,  as it relates to savings and loan
associations,  effective for taxable years  beginning  after  December 31, 1984.
Newberry Federal is subject to South Carolina income tax at the rate of 6%. This
rate of tax is imposed on savings and loan  associations  and  savings  banks in
lieu of the general state business  corporation  income tax. Newberry  Federal's
state income tax returns have not been audited within the last five years.

         Delaware Taxation.  As a Delaware holding company not earning income in
Delaware, DutchFork Bancshares is exempt from Delaware corporate income tax, but
is required to file an annual report with and pay an annual franchise tax to the
State of Delaware.

ITEM 2. DESCRIPTION OF PROPERTIES

Properties

         Newberry  Federal  currently  conducts  its  business  through its main
office located in Newberry,  South Carolina, and five other full-service banking
offices.  DutchFork  Bancshares  believes that these  facilities are adequate to
meet the present and immediately  foreseeable  needs of the Newberry Federal and
DutchFork Bancshares.

<TABLE>
<CAPTION>
                                     Leased,          Original      Net Book Value
                                     Licensed or      Year         of Property at
Location                             Owned            Acquired     September 30, 2001
---------------                      -------------    ---------   -------------------
                                                  (In thousands)
<S>                                   <C>               <C>          <C>
Main/Executive Office:
1735 Wilson Road
Newberry, South Carolina  29108....   Owned             1993           $2,320

Branch Offices:

1323 College Street
Newberry, South Carolina  29108....   Owned            1993               153

101 N. Wheeler Street
Prosperity, South Carolina  29127..   Owned            1989               130
</TABLE>


ITEM 3. LEGAL PROCEEDINGS

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


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

        None.

                                       31

<PAGE>



                                     PART II

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

         The information  regarding the market for DutchFork  Bancshares' common
equity and related  stockholder  matters is incorporated  herein by reference to
DutchFork Bancshares' 2001 Annual Report to Stockholders on page 58.


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

         The  information  regarding  management's  discussion  and  analysis of
financial condition and results of operation is incorporated herein by reference
to DutchFork  Bancshares'  2001 Annual Report to Stockholders on pages 6 through
14.


ITEM 7 FINANCIAL STATEMENTS

         The information  regarding financial  statements is incorporated herein
by reference to DutchFork  Bancshares'  2001 Annual  Report to  Stockholders  on
pages 15 through 55.


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

         None.

                                    PART III

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

               The information relating to the directors and officers of
DutchFork Bancshares and information regarding compliance with Section 16(a) of
the Exchange Act is incorporated herein by reference to DutchFork Bancshares'
Proxy Statement for the 2002 Annual Meeting of Stockholders at pages 4 through
9.


ITEM 10. EXECUTIVE COMPENSATION

         The information regarding executive compensation is incorporated herein
by  reference  to  DutchFork  Bancshares'  Proxy  Statement  for the 2002 Annual
Meeting of Stockholders at pages 7 through 9.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information  relating to security  ownership of certain  beneficial
owners  and  management  is  incorporated   herein  by  reference  to  DutchFork
Bancshares' Proxy Statement for the 2002 Annual Meeting of Stockholders at pages
3 through 4.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The  information   relating  to  certain   relationships   and  related
transactions is incorporated herein by reference to DutchFork  Bancshares' Proxy
Statement for the 2002 Annual Meeting of Stockholders at pages 9 through 10.

                                       32

<PAGE>



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

         (a)  (1)  The following are filed as a part of this report by means
                   of incorporation to DutchFork  Bancshares' 2001 Annual Report
                   to Stockholders:

                   o   Independent Auditors' Report

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

                   o   Consolidated  Statements  of Income  for the Years  Ended
                       September 30, 2001 and 2000

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

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

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

                   o   Notes to Consolidated Financial Statements

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

              (3)  Exhibits

                   3.1  Certificate of  Incorporation  of DutchFork  Bancshares,
                        Inc.(1)
                   3.2  Bylaws of DutchFork Bancshares, Inc.(1)
                   4.0  Specimen  Stock  Certificate  of  DutchFork  Bancshares,
                        Inc.(1)
                   10.1 Newberry Federal Savings Bank Employment  Agreement with
                        J. Thomas Johnson(2)
                   10.2 Newberry Federal Savings Bank Employment  Agreement with
                        Steve P. Sligh(2)
                   10.3 DutchFork Bancshares,  Inc. Employment Agreement with J.
                        Thomas Johnson(2)
                   10.4 DutchFork  Bancshares,  Inc.  Employment  Agreement with
                        Steve P. Sligh(2)
                   10.5 Newberry   Federal   Savings  Bank  Employee   Severance
                        Compensation Plan(1)
                   10.6 Adoption  Agreement  for  Employees'  Savings  &  Profit
                        Sharing Plan and Trust(1)
                   10.7 DutchFork  Bancshares,  Inc. 2001 Stock-Based  Incentive
                        Plan(3)
                   10.8 Newberry   Federal   Savings  Bank   Director   Deferred
                        Compensation Plan(4)
                   13.0 Annual Report to Stockholders
                   21.0 Subsidiary   information  is   incorporated   herein  by
                        reference  to  Part  I,  Item  1,   "Business-Subsidiary
                        Activities."
                   23.0  Consent of Clifton D. Bodiford, CPA


              ----------------
              (1)  Incorporated  herein by  reference  from the Exhibits to Form
                   SB-2,   Registration   Statement  and   amendments   thereto,
                   initially filed on March 8, 2000, Registration No. 333-31986.


                                       33
<PAGE>

              (2)   Incorporated  herein by reference  from the Exhibits to
                    the Annual  Report on Form  10-KSB for the fiscal  year
                    ended  September 30, 2000,  filed on December 12, 2000,
                    Registration No. 000-30483.

              (3)   Incorporated  herein by reference  from the  Definitive
                    Proxy   Statement  for  the  2001  Annual   Meeting  of
                    Stockholders,  as amended,  initially filed on December
                    21, 2000, Registration No. 000-30483.

              (4)   Incorporated  herein by reference  from the Exhibits to
                    Form S-8, Registration  Statement,  filed on August 23,
                    2001, Registration No. 333-68214.

         (b)   Reports on Form 8-K

                         None.




                                       34

<PAGE>

                                                                       CONFORMED


                                   SIGNATURES

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



                                        DUTCHFORK BANCSHARES, INC.


Date:  December 28, 2001                By:  /s/ J. Thomas Johnson
                                             ----------------------
                                             J. Thomas Johnson
                                             President, Chief
                                             Executive Officer and
                                             Chairman of the Board


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

<TABLE>
<CAPTION>
         Name                   Title                                          Date
         ----                   -----                                          ----
<S>                             <C>                                        <C>
/s/ J. Thomas Johnson           President, Chief Executive                 December 28, 2001
----------------------          Officer and Chairman of the Board
J. Thomas Johnson               President, Chief Executive


/s/ Steve P. Sligh              Executive Vice President, Chief            December 28, 2001
------------------              Finacial Officer, Treasurer
Steve P. Sligh                  and Director (principal financial and
                                accounting Officer)



/s/ Robert E. Livingston        Corporate Secretary and Director           December 28, 2001
-------------------------
Robert E. Livingston


/s/ Robert W. Owen              Director                                   December 28, 2001
---------------------------
Robert W. Owen


/s/ James E. Wiseman            Director                                   December 28, 2001
-------------------------
James E. Wiseman

</TABLE>