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, 2003

|_|   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: (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, 2003
were $15,548,560.

      The aggregate market value of the voting and non-voting common equity held
by non-affiliates was $40,741,654 based upon the average of the bid and asked
price ($41.11 per share) as quoted on the Nasdaq SmallCap Market on December 19,
2003. 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 15, 2003 was 1,127,841.

                       DOCUMENTS INCORPORATED BY REFERENCE

 Portions of the 2003 Annual Report to Stockholders and of the Proxy Statement
  for the 2004 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 Property.............................................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
Item 8A. Controls and Procedures.............................................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..............................................33
Item 11. Security Ownership of Certain Beneficial Owners and
               Management and Related Stockholder Matters....................33
Item 12. Certain Relationships and Related Transactions......................33
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. Except as required by applicable law or regulation, 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.


                                       3
<PAGE>

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
insurance companies. While those entities still provide a source of competition
for deposits, Newberry Federal currently faces competition for deposits from the
mutual fund industry as customers seek alternative sources of investment for
their funds. Newberry Federal also faces competition for investors' funds from
their direct purchase of short-term money market securities and other corporate
and government securities. While Newberry Federal's faces competition for loans
from the 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. Competition may increase
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,
                                           -------------------------------------------------------------------------------
                                                    2003                        2002                        2001
                                           -----------------------     -----------------------     -----------------------
                                                           Percent                     Percent                     Percent
                                            Amount        of Total      Amount        of Total      Amount        of Total
                                           --------       --------     --------       --------     --------       --------
                                                                       (Dollars in thousands)
<S>                                        <C>              <C>        <C>              <C>        <C>              <C>
Real estate loans:
   One- to four-family ..................  $ 25,193          42.53%    $ 28,370          45.12%    $ 43,061          55.32%
   Commercial real estate (1) ...........    11,778          19.88        9,043          14.38        8,917          11.46
   Construction .........................       811           1.37        3,493           5.56        2,278           2.93
   Land .................................     1,710           2.89        1,570           2.50        1,607           2.06
                                           --------       --------     --------       --------     --------       --------
      Total real estate loans ...........    39,492          66.67       42,476          67.56       55,863          71.77
                                           --------       --------     --------       --------     --------       --------
Consumer loans:
   Second mortgage loans, home equity
      loans and lines of credit .........     5,671           9.57        5,134           8.16        4,354           5.59
   Automobile ...........................     2,413           4.07        3,114           4.95        4,209           5.41
   Other ................................     4,652           7.85        5,251           8.35        4,793           6.15
                                           --------       --------     --------       --------     --------       --------
      Total consumer loans ..............    12,736          21.49       13,499          21.46       13,356          17.15

Commercial loans ........................     7,009          11.84        6,905          10.98        8,622          11.08
                                           --------       --------     --------       --------     --------       --------
      Total loans .......................    59,237         100.00%      62,880         100.00%      77,841         100.00%
                                                          ========                    ========                    ========
Less:
   Deferred loan origination fees
      and discounts .....................        --                          (6)                        (19)
   Loans in process .....................      (465)                       (745)                     (4,100)
   Allowance for loan losses ............      (401)                       (424)                       (635)
                                           --------                    --------                    --------
                                           $ 58,371                    $ 61,705                    $ 73,098
                                           ========                    ========                    ========

<CAPTION>
                                                            At September 30,
                                           ---------------------------------------------------
                                                    2000                         1999
                                           -----------------------     -----------------------
                                                           Percent                     Percent
                                            Amount        of Total      Amount        of Total
                                           --------       --------     --------       --------
                                                          (Dollars in thousands)
<S>                                        <C>              <C>        <C>              <C>
Real estate loans:
   One- to four-family ..................  $ 52,439          63.35%    $ 48,984          63.79%
   Commercial real estate (1) ...........    12,548          15.15        9,794          12.75
   Construction .........................     1,302           1.57        1,695           2.21
   Land .................................     1,548           1.87        1,432           1.86
                                           --------       --------     --------       --------
      Total real estate loans ...........    67,837          81.94       61,905          80.61
                                           --------       --------     --------       --------
Consumer loans:
   Second mortgage loans, home equity
      loans and lines of credit .........     4,989           6.03        4,318           5.62
   Automobile ...........................     4,574           5.53        4,398           5.73
   Other ................................     4,563           5.51        4,278           5.57
                                           --------       --------     --------       --------
      Total consumer loans ..............    14,126          17.07       12,994          16.92

Commercial loans ........................       820           0.99        1,892           2.47
                                           --------       --------     --------       --------
      Total loans .......................    82,783         100.00%      76,791         100.00%
                                                          ========                    ========
Less:
   Deferred loan origination fees
      and discounts .....................      (104)                       (108)
   Loans in process .....................    (3,906)                     (1,175)
   Allowance for loan losses ............      (465)                       (184)
                                           --------                    --------
                                           $ 78,308                    $ 75,324
                                           ========                    ========
</TABLE>

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


                                        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. 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 weekly average yield on U.S. treasury securities, adjusted
to a constant maturity of one year. 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.

      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.


                                       6
<PAGE>

      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 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 speculative construction loans to builders.

      Construction loans generally provide for the payment of interest only
during the construction phase. 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.


                                       7
<PAGE>

Interest rate adjustments on home equity lines of credit are limited to 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, 2003 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, 2003
                                                 ---------------------------------------------------------------------------------
                                                              Multi-
                                                              Family
                                                 One- to        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 ..........................   $   844      $    31          $811      $    8      $ 3,511      $2,544    $ 7,749
   More than one year to three years .........       744          516            --          78        4,031       1,939      7,308
   More than three years to four years .......       388          424            --         104        2,230         310      3,456
   More than four years to five years ........       961          488            --         434        2,223         379      4,485
   More than five years to 10 years ..........     3,901        6,986            --         996          697       1,837     14,417
   More than 10 years to 15 years ............     4,995        1,958            --          90           --          --      7,043
   More than 15 years ........................    13,360        1,375            --          --           44          --     14,779
                                                 -------      -------          ----      ------      -------      ------    -------
      Total amount due .......................   $25,193      $11,778          $811      $1,710      $12,736      $7,009    $59,237
                                                 =======      =======          ====      ======      =======      ======    =======
</TABLE>

      The following table presents, the dollar amount of all loans due after
September 30, 2004, which have fixed interest rates and floating or adjustable
interest rates.

<TABLE>
<CAPTION>
                                                                        Due After September 30, 2004
                                                                ------------------------------------------
                                                                 Fixed        Adjustable            Total
                                                                -------       ----------           -------
                                                                            (In thousands)
<S>                                                             <C>             <C>                <C>
Real estate loans:
   One- to four-family ..................................       $ 3,978         $20,371            $24,349
   Multi-family .........................................           772              40                812
   Commercial ...........................................         1,414           9,521             10,935
   Construction .........................................            --              --                 --
   Land .................................................           393           1,309              1,702
                                                                -------         -------            -------
      Total real estate loans ...........................         6,557          31,241             37,798
Consumer loans ..........................................         3,606           5,619              9,225
Commercial loans ........................................           388           4,077              4,465
                                                                -------         -------            -------
      Total loans .......................................       $10,551         $40,937            $51,488
                                                                =======         =======            =======
</TABLE>

      Loans to One Borrower. The maximum amount that Newberry Federal may lend
to one borrower is limited by regulation. At September 30, 2003, Newberry
Federal's regulatory limit on loans to one borrower was $4.9 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 $3.8 million and consisted of mostly commercial
real estate loans. These loans were performing according to their original terms
at September 30, 2003.

      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,
2003, Newberry Federal was servicing $958,000 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.

<TABLE>
<CAPTION>
                                                                                             Year Ended September 30,
                                                                                 --------------------------------------------------
                                                                                   2003                 2002                 2001
                                                                                 --------             --------             --------
                                                                                                   (In thousands)
<S>                                                                              <C>                  <C>                  <C>
Loans at beginning of period ........................................            $ 62,880             $ 77,841             $ 82,783
   Originations:
      Real estate:
         One- to four-family ........................................              17,157                4,076                6,777
         Multi-family ...............................................                  --                  880                   --
         Commercial .................................................                 840                  404                2,227
         Construction ...............................................                 811                  745                2,167
         Land .......................................................                 644                  873                  589
                                                                                 --------             --------             --------
            Total real estate loans .................................              19,452                6,978               11,760

      Consumer:
         Second mortgage loans, home equity loans
            and lines of credit .....................................               3,082                3,192                3,199
         Automobile .................................................                 898                1,144                2,214
         Education ..................................................                  --                    4                   15
         Other ......................................................               2,060                3,573                3,669
                                                                                 --------             --------             --------
            Total consumer loans ....................................               6,040                7,913                9,097

      Commercial ....................................................                 764                1,024                3,589
                                                                                 --------             --------             --------
            Total loans originated ..................................              26,256               15,915               24,446
                                                                                 --------             --------             --------

Loans purchased .....................................................                  --                   --                   --
Deduct:
      Principal loan repayments and prepayments .....................              17,437               23,105               16,718
      Loan sales ....................................................              12,462                7,771               12,670
      Transfers to real estate owned ................................                  --                   --                   --
                                                                                 --------             --------             --------
            Sub-total ...............................................              29,899               30,876               29,388
                                                                                 --------             --------             --------
Net loan activity ...................................................              (3,643)             (14,961)              (4,942)
                                                                                 --------             --------             --------
      Loans at end of period ........................................            $ 59,237             $ 62,880             $ 77,841
                                                                                 ========             ========             ========
</TABLE>

      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, 2003, Newberry Federal
had loan commitments and unadvanced loans and lines of credit totaling $23
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. Newberry Federal amortized
$5,000 of net deferred loan costs during the year ended September 30, 2003.

      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,


                                       11
<PAGE>

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.

      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.

      Mortgage loans are charged off when it becomes evident that a loss will be
incurred. Generally, commercial and consumer loans that are secured are charged
off when they become 120 days past due and unsecured loans are charged off when
they become 180 days past due.

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

<TABLE>
<CAPTION>
                                                                                            At September 30,
                                                                     --------------------------------------------------------------
                                                                     2003           2002           2001          2000          1999
                                                                     ----          ------          ----          ----          ----
                                                                                          (Dollars in thousands)
<S>                                                                  <C>           <C>             <C>           <C>           <C>
Nonaccruing loans:
   One- to four-family real estate .........................         $425          $  516          $132          $111          $149
   Multi-family ............................................           --              --            --            --            --
   Commercial real estate ..................................            1              88            --            --            --
   Construction ............................................           --              --            --            --            --
   Land ....................................................            9               7            --            --            --
   Consumer ................................................          115             160            17            22            14
                                                                     ----          ------          ----          ----          ----
      Total ................................................          550             771           149           133           163
Real estate owned(1) .......................................           --              --            --            --            --
Other repossessed assets ...................................           --              --            --            22            14
                                                                     ----          ------          ----          ----          ----
      Total nonperforming assets(2) ........................          550             771           149           155           177

Troubled debt restructurings ...............................          173             364           310            30            66
                                                                     ----          ------          ----          ----          ----
Troubled debt restructurings and
  total nonperforming assets ...............................         $723          $1,135          $459          $185          $243
                                                                     ====          ======          ====          ====          ====
Total nonperforming loans and troubled debt
   restructurings as a percentage of total loans ...........         1.22%           1.81%         0.59%         0.20%         0.30%

Total nonperforming assets and troubled debt
   restructurings as a percentage of total assets ..........         0.07%           0.52%         0.18%         0.08%         0.12%
</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, 2003, had nonaccruing loans been current according to their original terms
amounted to approximately $13,000. Newberry Federal included income on such
loans of $18,000 in total interest income for the year ended September 30, 2003.


                                       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,
                                        ----------------------------------------------------------------------------
                                                       2003                                     2002
                                        -------------------------------------   ------------------------------------
                                            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     Balance
                                        Loans   of Loans    Loans     Loans     Loans   of Loans   Loans     Loans
                                        ------  ---------  ------  ----------   ------  ---------  ------  ---------
                                                                    (Dollars in thousands)
<S>                                       <C>     <C>        <C>      <C>         <C>     <C>        <C>    <C>
Real estate loans:
   One- to four-family ..............     --     $  --        6       $270         1     $  29       23     $  814
   Multi-family .....................     --        --       --         --        --        --       --         --
   Commercial .......................     --        --        2         72        --        --        1         35
   Construction .....................     --        --       --         --        --        --       --         --
   Land .............................     --        --       --         --        --        --        1          7
Consumer loans:
   Second mortgage loans, home
     equity loans and lines of credit      1         8        2        275        --        --        1         22
   Automobile .......................      4        10        6         36         2        26        8         68
   Other ............................      8        50       22         53        10        31       35        243
Commercial loans ....................      2       157        1        177         4        34        3         81
                                          --     -----       --       ----        --      ----       --     ------
      Total .........................     15     $ 225       39       $883        17     $ 120       72     $1,270
                                          ==     =====       ==       ====        ==     =====       ==     ======

Delinquent loans to total loans......             1.87%                                   0.19%               2.02%

<CAPTION>
                                                   At September 30,
                                        ------------------------------------------
                                                          2001
                                        ------------------------------------------
                                             60-89 Days          90 Days or More
                                        ------------------    --------------------
                                        Number   Principal     Number    Principal
                                          of      Balance        of       Balance
                                         Loans    of Loans     Loans     of Loans
                                        ------   ---------     ------    ---------
                                                (Dollars in thousands)
<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%
</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, 2003, 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" and restructured delinquent loans that meet all
qualifications are designated "troubled debt restructurings."

      The following table sets forth classified assets at September 30, 2003.

<TABLE>
<CAPTION>
                                          Loss                 Doubtful                Substandard             Special Mention
                                  -------------------    ---------------------    ----------------------    ---------------------
                                  Principal   Number     Principal     Number     Principal      Number     Principal     Number
                                   Balance   of Loans     Balance     of Loans     Balance      of Loans      Balance    of Loans
                                  --------   --------    ---------    --------    ---------     --------    ---------    --------
                                                                       (Dollars in thousands)
<S>                               <C>             <C>    <C>                <C>   <C>                 <C>    <C>              <C>
Real estate loans:
   One- to four-family ........   $     --        --     $      --          --          516           12     $     --         --
   Multi-family ...............         --        --            --          --           --           --           --         --
   Commercial .................         --        --            --          --           70            1           --         --
   Construction ...............         --        --            --          --           --           --           --         --
   Land .......................         --        --            --          --            9            1           --         --
Consumer loans:
   Second mortgage loans,
   home equity loans and
     lines of credit ..........         --        --            --          --          468           17           --         --
   Automobile .................         --        --            --          --           73           14           --         --
   Other ......................         --        --            --          --           98           20           --         --
Commercial loans ..............         --        --            --          --          205            3           --         --
                                  --------   -------     ---------    --------    ---------     --------     --------    -------
      Total ...................   $     --        --     $      --          --    $   1,439           68     $     --         --
                                  ========   =======     =========    ========    =========     ========     ========    =======
Delinquent loans to
   total loans................          --                      --                     2.43%                       --
</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
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


                                       14
<PAGE>

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.

      Newberry Federal individually evaluates mortgage loans, consumer and
commercial loans, in excess of $500,000 for impairment. In addition,
concentrations of loans in excess of this amount to any one borrower are
individually evaluated. Also, loans for less than this amount may be
individually evaluated if significant delinquencies on a specific loan have
occurred in the past. The allowance on these loans is determined based on the
present value of expected future cash flows discounted at the loan's effective
interest rate or in some cases, at the fair value of the collateral if the loan
is collateral dependent. No such impaired loans were noted during fiscal years
2003 or 2002. Personal guarantees on commercial real estate loans are given
consideration only in situations where the guarantor is sufficiently liquid and
clearly able to honor the commitments.

      Newberry Federal considers credit risk associated with its commitments to
extend credit, but has not found it necessary to provide any allowance for such
commitments primarily because limited loan demand results in nominal loan
commitments. Additionally, commitments are typically extended for no more than
60 days. Newberry Federal generally does not provide guarantees or letters of
credit.

      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,
                                                                         ----------------------------------------------------------
                                                                          2003         2002         2001         2000         1999
                                                                         ------       ------       ------       ------       ------
                                                                                           (Dollars in thousands)
<S>                                                                        <C>          <C>          <C>          <C>          <C>
Allowance for loan losses, beginning of year ......................      $  424       $  635       $  465       $  184       $  181
Charged-off loans:
   One- to four-family real estate ................................           6           --            3           --            5
   Multi-family ...................................................          --           --           --           --           --
   Commercial real estate .........................................          --           --           --           --           --
   Construction ...................................................          --           --           --           --           --
   Land ...........................................................          --           --           --           --            1
   Commercial .....................................................         119           20           --           --           --
   Consumer .......................................................         127          216           92          150          161
                                                                         ------       ------       ------       ------       ------
      Total charged-off loans .....................................         252          236           95          150          167
Recoveries on loans previously charged off:
   One- to four-family real estate ................................          --           --           --           --            1
   Multi-family ...................................................          --           --           --           --           --
   Commercial real estate .........................................          --           --           --           --           --
   Construction ...................................................          --           --           --           --           --
   Land ...........................................................          --           --           --           --           --
   Commercial .....................................................          --           --           --           --           --
   Consumer .......................................................          34           25           24           91           27
                                                                         ------       ------       ------       ------       ------
      Total recoveries ............................................          34           25           24           91           28
Net loans charged-off .............................................         218          211           71           59          139
Provision for loan losses .........................................         195           --          241          340          142
                                                                         ------       ------       ------       ------       ------
Allowance for loan losses, end of period ..........................      $  401       $  424       $  635       $  465       $  184
                                                                         ======       ======       ======       ======       ======

Net loans charged-off to average interest-earning loans ...........        0.42%        0.31%        0.10%        0.19%        0.18%
Allowance for loan losses to total loans ..........................        0.68%        0.67%        0.82%        0.56%        0.24%
Allowance for loan losses to nonperforming
   loans and troubled debt restructurings .........................       55.46%       37.38%      138.34%      251.48%       80.79%
Net loans charged-off to allowance for loan losses ................       54.36%       49.76%       11.18%       32.26%       74.59%
Recoveries to charge-offs .........................................       13.49%       10.59%       25.26%       60.67%       17.37%
</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,
                                   ------------------------------------------------------------------------------------------------
                                              2003                             2002                             2001
                                   -----------------------------    ------------------------------   ------------------------------
                                           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......................     $212       52.87%     66.67%     $328       77.36%      67.55%    $378       59.53%     71.77%
Consumer.........................      189       47.13      21.50        96       22.64       21.46      257       40.47      17.15
                                      ----      ------      -----      ----      ------       -----     ----      ------      -----
   Total allowance
     for loan losses.............     $401      100.00%                $424      100.00%                $635      100.00%
                                      ====      ======                 ====      ======                 ====      ======

<CAPTION>
                                                                                            At September 30,
                                                                    ---------------------------------------------------------------
                                                                                 2000                             1999
                                                                    ------------------------------   ------------------------------
                                                                             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.......................................................   $140       30.11%     81.94%     $ 85       45.95%     80.61%
Consumer..........................................................    325       69.89      17.07       100       54.05      16.92
                                                                     ----      ------      -----      ----      ------      -----
   Total allowance
     for loan losses..............................................   $465      100.00%                $185      100.00%
                                                                     ====      ======                 ====      ======
</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, 2003, 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, 2003, DutchFork Bancshares' investment in mortgage-backed
securities had an aggregate book value in excess of 62% of DutchFork Bancshares'
retained earnings at that date, with an aggregate book value of $20 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,
                                                     ------------------------------------------------------------------------------
                                                               2003                         2002                       2001
                                                     ------------------------     -----------------------     ---------------------
                                                     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 ..........................           --             --            --            --            --          --
                                                     ---------       --------      --------      --------      --------    --------
            Total ...............................           --             --            --            --            --          --

   Debt securities available-for-sale:
      Obligations of U.S. Treasury and U.S.
        government agencies .....................       11,799         11,779         1,519         1,530        11,819      11,745
      Corporate Bonds ...........................       22,087         21,147        16,337        17,225            --          --
      Other securities ..........................           --             --            --            --            --          --
                                                     ---------       --------      --------      --------      --------    --------
            Total ...............................       33,886         32,926        17,856        18,755        11,819      11,745

   Equity securities available-for-sale:
      Federal Home Loan Bank stock ..............        2,750          2,750         3,000         3,000         3,000       3,000
      Mutual funds ..............................          982            869           982           879           982         876
      Preferred stock ...........................      106,310        105,108        39,588        39,454        33,468      33,817
      Other securities ..........................           71            199            71           122            71         122
                                                     ---------       --------      --------      --------      --------    --------
        Total ...................................      110,113        108,926        43,641        43,455        37,521      37,815

   Equity securities held-to-maturity:
      Other securities ..........................           50             50            50            50            50          50
            Total debt and equity securities ....      144,049        141,902        61,547        62,260        49,390      49,610
                                                     ---------       --------      --------      --------      --------    --------

Mortgage-backed securities:
   Mortgage-backed securities held-to-maturity:
      FHLMC .....................................          799            807           739         1,739         2,356       2,349
      FNMA ......................................          556            561         2,096         1,141         1,018       1,030
                                                     ---------       --------      --------      --------      --------    --------
          Total mortgage-backed securities
              held-to-maturity ..................        1,355          1,368         2,835         2,880         3,374       3,379
                                                     ---------       --------      --------      --------      --------    --------

   Mortgage-backed securities available-for-sale:
      FHLMC .....................................       11,843         12,820        31,729        31,909        72,514      72,603
      FNMA ......................................        7,274          6,089        28,365        27,784        21,919      21,199
      SLMA ......................................           --             --         1,519         1,530            --          --
      GNMA ......................................           --             --            10            12         8,988       9,362
      Private issues ............................           --             --         3,393         3,393         8,353       8,525
                                                     ---------       --------      --------      --------      --------    --------
        Total mortgage-backed securities
         available-for-sale .....................       19,117         18,909        65,016        64,628       111,774     111,689
                                                     ---------       --------      --------      --------      --------    --------
         Net unrealized (losses) gains on
          available-for-sale securities .........       (2,356)            --           325            --           135          --
                                                     ---------       --------      --------      --------      --------    --------

            Total securities ....................    $ 162,165       $162,179      $129,723      $129,768      $164,673    $164,678
                                                     =========       ========      ========      ========      ========    ========
</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,
                                                                                    -----------------------------------------------
                                                                                       2003               2002               2001
                                                                                    ---------          ---------          ---------
                                                                                                     (In thousands)
<S>                                                                                 <C>                <C>                <C>
Mortgage-backed securities:
   Mortgage-backed securities, beginning of period (1) ....................         $  67,463          $ 115,063          $ 109,840
   Purchases:
      Mortgage-backed securities - held-to-maturity .......................                --                 --                 --
      Mortgage-backed securities - available-for-sale .....................            29,118            155,922            161,101
   Sales:
      Mortgage-backed securities - available-for-sale .....................           (17,420)           (92,341)          (105,415)
   Repayments and prepayments:
      Mortgage-backed securities ..........................................           (58,332)          (111,234)           (55,339)
   Increase (decrease) in net premium .....................................              (746)               221                825
   Increase (decrease) in unrealized gain .................................               181               (168)             4,051
                                                                                    ---------          ---------          ---------
        Net increase (decrease) in mortgage-backed securities .............           (47,199)           (47,600)             5,223
                                                                                    ---------          ---------          ---------
   Mortgage-backed securities, end of period ..............................         $  20,264          $  67,463          $ 115,063
                                                                                    =========          =========          =========
Investment securities:
   Investment securities, beginning of period (2) .........................         $  62,260          $  49,611          $  25,914
   Purchases:
      Investment securities - held-to-maturity ............................                --                 --                 --
      Investment securities - available-for-sale ..........................           209,848             58,440             55,041
      Investment securities - trading .....................................            18,059             14,430              1,000
   Sales:
      Investment securities - available-for-sale ..........................          (128,241)           (46,638)           (34,842)
      Investment securities - trading .....................................           (18,059)           (14,430)            (1,002)
   Calls:
      Investment securities - held-to-maturity ............................                --                 --                 --
      Investment securities - available-for-sale ..........................                --                 --                 --
   Maturities:
      Investment securities - held-to-maturity ............................                --                 --                 --
      Investment securities - available-for-sale ..........................                --                 --                 --
   Increase (decrease) in net premium .....................................               893                359                622
   Increase (decrease) in unrealized gain .................................            (2,860)               488              2,878
                                                                                    ---------          ---------          ---------
        Net increase (decrease) in investment securities ..................            79,640             12,649             23,697
                                                                                    ---------          ---------          ---------
   Investment securities, end of period ...................................         $ 141,902          $  62,260          $  49,611
                                                                                    =========          =========          =========
</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, 2003.

<TABLE>
<CAPTION>
                                                                       At September 30, 2003
                                             ---------------------------------------------------------------------
                                                                             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:
     Other ............................      $     --           --%     $     --           --%  $     --        --%
      Obligations of U.S.
         Government agencies ..........            --           --            --           --         --        --
      Mortgage-backed securities ......            --           --            --           --         --        --
                                             --------     --------      --------     --------   --------  --------
         Total securities at
            amortized cost ............      $     --           --%     $     --           --%  $     --        --%
                                             ========     ========      ========     ========   ========  ========

Available-for-sale securities:
   Investment securities:
      Obligations of U.S. Government
         and agencies .................      $ 10,778         3.54%     $     --           --%  $    480      3.93%
      Corporate Bonds .................            --           --         5,926         2.96         --        --
      Equity securities(1) ............         8,112         7.01        61,124         9.14        450     10.49
      Mutual funds ....................            --           --            --           --         --        --
   Mortgage-backed securities .........            --           --            --           --         --        --
                                             --------     --------      --------     --------   --------  --------

         Total securities at fair value      $ 18,890         5.03%     $ 67,050         8.59%  $    930      7.10%
                                             ========     ========      ========     ========   ========  ========

<CAPTION>
                                                           At September 30, 2003
                                             -----------------------------------------------
                                                 More than
                                                  Ten Years                   Totals
                                             ---------------------    ----------------------
                                                          Weighted                  Weighted
                                             Carrying      Average    Carrying       Average
                                              Value         Yield      Value          Yield
                                             --------     --------    --------      --------
                                                           (Dollars in thousands)
<S>                                          <C>             <C>      <C>               <C>
Held-to-maturity securities:
   Investment securities:
     Other ............................      $     --           --%   $     --            --%
      Obligations of U.S.
         Government agencies ..........            --           --          --            --
      Mortgage-backed securities ......         1,355         3.97       1,355          3.97
                                             --------     --------    --------      --------
         Total securities at
            amortized cost ............      $  1,355         3.97%   $  1,355          3.97%
                                             ========     ========    ========      ========

Available-for-sale securities:
   Investment securities:
      Obligations of U.S. Government
         and agencies .................      $    521         4.94%   $ 11,779          3.62%
      Corporate Bonds .................        15,221         1.63      21,147          2.01
      Equity securities(1) ............        38,421        11.23     108,100          9.33
      Mutual funds ....................           869         3.70         869          3.70
   Mortgage-backed securities .........        18,909         7.87      18,909          7.87
                                             --------     --------    --------      --------

         Total securities at fair value      $ 73,890         8.26%   $160,814          7.75%
                                             ========     ========    ========      ========
</TABLE>

----------
(1)   Weighted average yield data for FHLMC Preferred Stock 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, 2003 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.

<TABLE>
<CAPTION>
                                                                                        Year Ended September 30,
                                                                            -----------------------------------------------
                                                                               2003                2002              2001
                                                                            ---------           ---------         ---------
                                                                                              (In thousands)
<S>                                                                         <C>                 <C>               <C>
Beginning balance .............................................             $ 149,290           $ 147,258         $ 147,730
Increase (decrease) before interest credited ..................                (8,661)             (2,193)           (7,100)
Interest credited .............................................                 2,800               4,225             6,628
                                                                            ---------           ---------         ---------
Net increase (decrease) .......................................                (5,861)              2,032              (472)
                                                                            ---------           ---------         ---------
Ending balance ................................................             $ 143,429           $ 149,290         $ 147,258
                                                                            =========           =========         =========
</TABLE>

      The following table indicates the amount of Newberry Federal's jumbo
certificates of deposits by time remaining until maturity as of September 30,
2003. Jumbo certificates of deposits have principal balances of $100,000 or
more.

<TABLE>
<CAPTION>
                                                                                           Weighted
     Maturity                                                                               Average
      Period                                                        Amount                   Rate
------------------                                              --------------           ------------
                                                                (In thousands)
<S>                                                                 <C>                       <C>
Three months or less......................................          $ 8,325                   2.09%
Over 3 through 6 months...................................            9,004                   1.98
Over 6 through 12 months..................................           12,112                   1.64
Over 12 months............................................            2,351                   3.60
                                                                    -------
      Total...............................................          $31,792                   2.00%
                                                                    =======
</TABLE>


                                       22
<PAGE>

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

<TABLE>
<CAPTION>
                                                                   For the Year Ended September 30,
                                    ------------------------------------------------------------------------------------------------
                                                2003                             2002                              2001
                                    -----------------------------  --------------------------------  -------------------------------
                                               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.................   $ 18,285     12.49%     0.74%  $ 16,075       10.87%      1.29%  $ 13,969       9.94%      2.25%
NOW and money market
   accounts......................     32,462     22.18      0.58     31,580       21.36       1.06     30,538      21.73       1.24
Certificates of deposit (1)......     98,899     65.33      2.59    100,224       67.77       3.67     96,025      68.33       4.90
                                    --------    ------             --------      ------              --------     ------
      Total average deposits.....   $149,646    100.00%            $147,879      100.00%             $140,532     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, 2003
                                                           -------------------------------------------------------------------------
                                                                                              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:
   0.00 to 2.00% .................................          $59,516          $1,908          $   --          $    4          $61,428
   2.01 to 4.00% .................................           17,539           6,080           2,195             373           26,187
   4.01 to 5.00% .................................            1,288             385              45             810            2,528
   5.01 to 6.00% .................................              258             165              --             159              582
   6.01 to 7.00% .................................               --               2              19              --               21
   7.01 to 8.00% .................................               --             112              --              --              112
   8.01 to 9.00% .................................               --              --              --              --               --
                                                            -------          ------          ------          ------          -------

      Total certificates of deposit ..............          $78,601          $8,652          $2,259          $1,346          $90,858
                                                            =======          ======          ======          ======          =======
</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, 2003,
Newberry Federal had the ability to borrow up to approximately $59 million from
the Federal Home Loan Bank of Atlanta. At September 30, 2003, Newberry Federal
had outstanding advances of $55 million.


                                       23
<PAGE>

      At September 30, 2003, Newberry Federal also maintained a $12.5 million
unsecured credit facility with a third party financial institution. At September
30, 2003, 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 at
September 30, 2001) during the periods and at the dates indicated.

<TABLE>
<CAPTION>
                                                                                               At or For the Year Ended
                                                                                                     September 30,
                                                                                    -----------------------------------------------
                                                                                      2003                2002                2001
                                                                                    -------             -------             -------
                                                                                                 (Dollars in thousands)
<S>                                                                                 <C>                 <C>                 <C>
Federal Home Loan Bank advances:
   Average balance outstanding .........................................            $36,425             $59,521             $46,164
   Maximum amount outstanding at any month-end
      during the period ................................................             55,000              60,000              60,000
   Balance outstanding at end of period ................................             55,000              35,000              60,000
   Weighted average interest rate during the period ....................               5.62%               4.71%               4.98%
   Weighted average interest rate at end of period .....................               4.10%               5.73%               4.44%

Other borrowings:
   Average balance outstanding .........................................            $ 1,035             $   952             $ 1,034
   Maximum amount outstanding at any month-end
      during the period ................................................             24,520              19,335               3,490
   Balance outstanding at end of period ................................                 --                  --                  --
   Weighted average interest rate during the period ....................               4.84%               1.97%               4.84%
   Weighted average interest rate at end of period .....................                 --                  --                  --
</TABLE>

Subsidiary Activities

      DutchFork Bancshares' sole subsidiary is Newberry Federal. Newberry
Federal has one wholly owned subsidiary, Inter-Community Service Corporation,
which operates an insurance agency. At September 30, 2003, Inter- Community
Service Corporation's assets totaled approximately $35,000.

Personnel

      As of September 30, 2003, DutchFork Bancshares had 40 full-time employees
and 6 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


                                       24
<PAGE>

and is intended primarily for the protection of the insurance fund and
depositors. The regulatory structure also gives the regulatory authorities
extensive discretion 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 activities permitted for financial holding
companies and multiple savings and loan 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 in its
activities as described above. 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
Bank 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. However, the Office of Thrift Supervision has issued an
interpretation concluding that multiple savings and loan holding companies may
also engage in activities permissible for financial holding companies.

      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.


                                       25
<PAGE>

      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 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.

      OTS has authority to establish higher capital requirements where it
determines that the circumstances of a particular association so require.

      The following table presents Newberry Federal's capital position at
September 30, 2003.

<TABLE>
<CAPTION>
                                                                                                        Capital
                                                                                             -----------------------------
                                     Actual           Required                Excess         Actual               Required
                                    Capital            Capital                Amount         Percent              Percent
                                    -------           --------                -------        -------              --------
                                                                      (Dollars in thousands)
<S>                                 <C>               <C>                     <C>             <C>                   <C>
Tangible...............             $32,398           $  4,738                $27,660         13.68%                2.00%
Core (Leverage)........              32,398              9,476                 22,922         13.68%                4.00%
Risk-based.............              32,679             13,815                 18,864         18.76%                8.00%
</TABLE>


                                       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 of assessable deposits for the
riskiest.

      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, 2003, Newberry Federal's limit on loans to one borrower was $4.9 million,
and Newberry Federal's largest aggregate outstanding balance of loans to one
borrower was $3.8 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.

      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, 2003, Newberry Federal met the qualified
thrift lender test.


                                       27
<PAGE>

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.

      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, 2003 totaled
$62,000.

      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 their holding companies and has the
authority to bring actions against the institution and all
institution-affiliated parties, including stockholders, and any attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured institution. Formal
enforcement action may range from the issuance of a capital directive or cease
and desist order to removal of officers and/or directors 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.


                                       28
<PAGE>

      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 $2.8 million at September 30, 2003.

      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 $6.0 million to
and including $42.1 million; a 10% reserve ratio is applied above $42.1 million.
The first $6.0 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 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."


                                       29
<PAGE>

                           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 2003
taxable year, DutchFork Bancshares is subject to a maximum federal income tax
rate of 34%.

      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%
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.


                                       30
<PAGE>

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 PROPERTY

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>
                                                                                                            Net Book Value
                                                                          Leased,          Original         of Property at
                                                                        Licensed or          Year           September 30,
 Location                                                                  Owned           Acquired              2003
----------                                                             -------------      ----------      ------------------
                                                                                                            (In thousands)
<S>                                                                        <C>               <C>                <C>
Main/Executive Office:
1735 Wilson Road
Newberry, South Carolina 29108.....................................        Owned             1993               $2,568

Branch Offices:

1323 College Street
Newberry, South Carolina 29108.....................................        Owned             1993                  557

101 N. Wheeler Street
Prosperity, South Carolina 29127...................................        Owned             1989                   54
</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' 2003 Annual Report to Stockholders on page 69.

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' 2003 Annual Report to Stockholders on pages 6 through
16.

ITEM 7. FINANCIAL STATEMENTS

      The information regarding financial statements is incorporated herein by
reference to DutchFork Bancshares' 2003 Annual Report to Stockholders on pages
17 through 66.

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

      None.

ITEM 8A. CONTROLS AND PROCEDURES

      The Company's management, including the Company's principal executive
officer and principal financial officer, have evaluated the effectiveness of the
Company's "disclosure controls and procedures," as such term is defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"). Based upon their evaluation, the principal executive
officer and principal financial officer concluded that, as of the end of the
period covered by this report, the Company's disclosure controls and procedures
were effective for the purpose of ensuring that the information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act with the Securities and Exchange Commission (the "SEC") (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and (2) is accumulated and communicated to the Company's
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure. In
addition, based on that evaluation, no change in the Company's internal control
over financial reporting occurred during the quarter ended September 30, 2003
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.

                                    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 2004 Annual Meeting of Stockholders at pages 5 through 6 and
page 9.

      DutchFork Bancshares has adopted a Code of Ethics and Business Conduct
applicable to DutchFork Bancshares' Chief Executive Officer and Chief Financial
Officer. A copy of the Code of Ethics and Business Conduct will be furnished
without charge to any persons upon written request to Robert E. Livingston, III,
Corporate Secretary DutchFork Bancshares, Inc., 1785 Wilson Road, Newberry, SC
29108.


                                       32
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

      The information regarding executive compensation is incorporated herein by
reference to DutchFork Bancshares' Proxy Statement for the 2004 Annual Meeting
of Stockholders at pages 6 through 9.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

      The information relating to security ownership of certain beneficial
owners and management is incorporated herein by reference to DutchFork
Bancshares' Proxy Statement for the 2004 Annual Meeting of Stockholders at pages
3 through 4.

Equity Compensation Plan Information as of September 30, 2003

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Plan category                     Number of securities                Weighted-average                   Number of securities
                                  to be issued upon                   exercise price of                  remaining available for
                                  exercise of outstanding             outstanding options,               future issuance under
                                  options, warrants and               warrants and rights                equity compensation
                                  rights                                                                 plans (excluding
                                                                                                         securities reflected in
                                                                                                         column (a))
                                  (a)                                 (b)                                (c)
--------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                                 <C>                                 <C>
Equity compensation
plans approved by
security holders                          101,437                             $16.4375                            56,418
--------------------------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders                            --                                   --                                 --
--------------------------------------------------------------------------------------------------------------------------------
Total                                     101,437                             $16.4375                            56,418
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

      DutchFork does not maintain any equity compensation plans that have not
been approved by security holders.

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 2004 Annual Meeting of Stockholders at pages 9 through 10.

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' 2003 Annual Report to
                  Stockholders:

                  o     Report of Independent Auditor

                  o     Consolidated Balance Sheets as of September 30, 2003 and
                        2002

                  o     Consolidated Statements of Income for the Years Ended
                        September 30, 2003 and 2002

                  o     Consolidated Statements of Comprehensive Operations for
                        the Years Ended September 30, 2003 and 2002


                                       33
<PAGE>

                  o     Consolidated Statements of Changes in Stockholders'
                        Equity for the Years Ended September 30, 2003 and 2002

                  o     Consolidated Statements of Cash Flows for the Years
                        Ended September 30, 2003 and 2002

                  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  List of Subsidiaries

                        23.0  Consent of Clifton D. Bodiford, CPA

                        31.1  Rule 13a-14(a)/15d-14(a) Certification of Chief
                              Executive Officer

                        31.2  Rule 13a-14(a)/15d-14(a) Certification of Chief
                              Financial Officer

                        32.1  Section 1350 Certification of Chief Executive
                              Officer

                        32.2  Section 1350 Certification of Chief Financial
                              Officer

                  (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.

                  (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.


                                       34
<PAGE>

      (b)   Reports on Form 8-K

            On August 4, 2003, DutchFork Bancshares furnished a Current
            Report on Form 8-K announcing its financial results for the quarter
            ended June 30, 2003.


                                       35
<PAGE>



                                   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 29, 2003               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 29, 2003
---------------------------        Officer and Chairman of the Board
J. Thomas Johnson                  (principal executive officer)

/s/ Steve P. Sligh                 Executive Vice President, Chief              December 29, 2003
---------------------------        Financial Officer, Treasurer
Steve P. Sligh                     and Director (principal financial and
                                   accounting officer)

/s/ Robert E. Livingston           Corporate Secretary and Director             December 29, 2003
---------------------------
Robert E. Livingston

/s/ Robert W. Owen                 Director                                     December 29, 2003
---------------------------
Robert W. Owen

/s/ James E. Wiseman               Director                                     December 29, 2003
---------------------------
James E. Wiseman
</TABLE>


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