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, 2000


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

     For the transition period from _________ to __________

                         Commission File Number: 0-30483

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

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

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


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

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

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

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

     The issuer's  gross  revenues for the fiscal year ended  September 30, 2000
were $16,647,446.

     The aggregate market value of the voting and non-voting  common equity held
by  non-affiliates  was $17,473,279  based upon the average of the bid and asked
price  ($13.1875 per share) as quoted on the Nasdaq  SmallCap Market on December
1, 2000.  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 1, 2000 was 1,560,550.

                       DOCUMENTS INCORPORATED BY REFERENCE

       Portions of the 2000 Annual Report to Stockholders and of the Proxy
     Statement for the 2001 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...........................................1
Item 2.  Description of Properties........................................30
Item 3.  Legal Proceedings................................................30
Item 4.  Submission of Matters to a Vote of Securities Holders............30

                                     Part II

Item 5.  Market for Common Equity and Related Stockholder Matters.........30
Item 6.  Management's Discussion and Analysis or Plan of Operation........31
Item 7.  Financial Statements.............................................31
Item 8.  Changes In and Disagreements with Accountants on Accounting
         and Financial Disclosure ........................................31

                                    Part III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act................31
Item 10. Executive Compensation...........................................31
Item 11. Security Ownership of Certain Beneficial Owners and Management...31
Item 12. Certain Relationships and Related Transactions...................31
Item 13. Exhibits and Reports on Form 8-K.................................32

<PAGE>

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

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

                                     PART I

Item 1.   DESCRIPTION OF BUSINESS

General

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

     Newberry  Federal's  principal  business is  attracting  deposits  from the
general public and originating loans secured by one-to-four  family  residential
real estate properties located in its market area. Newberry Federal 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 and
one banking  office located in northwest  Lexington  County,  although  Newberry
Federal also originates loans to borrowers and accepts deposits from individuals
residing in the bordering areas of contiguous  counties.  Newberry and Lexington
Counties are located in central South Carolina, approximately 35 miles northwest
of Columbia, the state capital.

     Newberry  and  Lexington  Counties  are  located  northwest  of Columbia on
Interstate 26 in central South  Carolina.  Lexington  County  exhibits  stronger
demographics  than Newberry County because of its closer  proximity to Columbia,
the state capital.  On average,  the  demographics of Newberry County are weaker
than South  Carolina  and the U.S.  as a whole,  while the  opposite is true for
Lexington County.

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

                                        3
<PAGE>

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

Lending Activities

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

                                        4

<PAGE>

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

<TABLE>
<CAPTION>
                                                                               At September 30,
                                                         -------------------------------------------------------------
                                                                2000                 1999                1998
                                                         ------------------   ------------------  -------------------
                                                                   Percent              Percent              Percent
                                                          Amount   of Total    Amount   of Total   Amount    of Total
                                                         --------  --------   --------  --------  --------   --------
                                                                             (Dollars in thousands)
Real estate loans:
<S>                                                       <C>        <C>      <C>         <C>     <C>         <C>
   One- to four-family.................................   $52,439    63.35%   $48,984     63.79%  $44,543     61.78%
   Commercial real estate (1)..........................    12,548    15.15      9,794     12.75     9,119     12.65
   Construction........................................     1,302     1.57      1,695      2.21     1,173      1.63
   Land................................................     1,548     1.87      1,432      1.86     1,510      2.09
                                                          -------    -----    -------     -----    ------    ------
      Total real estate loans..........................    67,837    81.94     61,905     80.61    56,345     78.15
                                                          -------    -----    -------     -----    ------    ------
Consumer loans:
   Second mortgage loans, home equity
      loans and lines of credit........................     4,989     6.03     4,318       5.62     4,236      5.88
   Automobile..........................................     4,574     5.53     4,398       5.73     4,192      5.81
   Other...............................................     4,563     5.51     4,278       5.57     4,709      6.54
                                                          -------    -----    ------      -----    ------    ------
      Total consumer loans.............................    14,126    17.07    12,994      16.92    13,137     18.23


Commercial loans.......................................       820     0.99     1,892       2.47     2,614      3.63
                                                          -------   ------    ------     ------    ------    ------
      Total loans......................................    82,783   100.00%   76,791     100.00%   72,096    100.00%
                                                                    ======               ======              ======
Less:
   Deferred loan origination fees
      and discounts....................................      (104)              (108)                (113)
   Loans in process....................................    (3,906)            (1,175)                (553)
   Allowance for loan losses...........................      (465)              (184)                (181)
                                                          -------             -------              -------
      Total loans, net.................................   $78,308             $75,324              $71,249
                                                          =======             =======              =======

<CAPTION>

                                                                        At September 30,
                                                           ----------------------------------------
                                                                   1997                 1996
                                                            ------------------   ------------------
                                                                      Percent              Percent
                                                             Amount   of Total   Amount    of Total
                                                            --------  --------   -------   --------
                                                                     (Dollars in thousands)

Real estate loans:
<S>                                                          <C>        <C>       <C>        <C>
   One- to four-family.................................      $42,173    62.54%    $41,138    64.60%
   Commercial real estate (1)..........................        8,174    12.13       7,060    11.10
   Construction........................................          969     1.44       2,520     3.96
   Land................................................        1,172     1.74         901     1.42
                                                             -------   ------      ------    -----
      Total real estate loans..........................       52,488    77.85      51,619    81.08
                                                             -------   ------      ------    -----
Consumer loans:
   Second mortgage loans, home equity
      loans and lines of credit........................        2,953     4.38       1,656     2.60
   Automobile..........................................        4,819     7.15       4,439     6.98
   Other...............................................        5,116     7.59       4,540     7.13
                                                              ------   ------      ------    -----
      Total consumer loans.............................       12,888    19.12      10,635    16.71


Commercial loans.......................................        2,041     3.03       1,408      2.21
                                                              ------   ------      ------    ------
      Total loans......................................       67,417   100.00%     63,662    100.00%
                                                                       ======                ======
Less:
   Deferred loan origination fees
      and discounts....................................         (118)                (122)
   Loans in process....................................       (1,110)              (1,277)
   Allowance for loan losses...........................         (192)                (226)
                                                              -------             --------
      Total loans, net.................................       $65,997             $62,037
                                                              =======             ========
</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, although 15 to 20 year terms constitute the largest percentage of current
originations. Generally, all conforming fixed-rate loans with maturities over 15
years are sold in the  secondary  market with  Newberry  Federal  retaining  the
servicing rights.

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

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

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

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

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

                                        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 with 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,  retail and owner  occupied  properties  and churches,  all of which are
located in Newberry  Federal's primary market area. Loans to churches are fixed-
and adjustable-rate mortgage loans with a maximum loan-to-value ratio of 80%. At
September 30, 2000, church loans totaled $1.1 million.

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

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

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

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

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

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

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

     The underwriting standards employed by Newberry Federal for second mortgage
loans,  home equity  loans and lines of credit  include a  determination  of the
applicant's  credit history,  an assessment of the  applicant's  ability to meet
existing  obligations  and  payments on the  proposed  loan and the value of the
collateral securing the loan. Home equity

                                        7

<PAGE>

lines of credit have adjustable rates of interest which are indexed to the prime
rate as reported in The Wall Street Journal.  Interest rate  adjustments on home
equity lines of credit are limited to 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, 2000 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, 2000
                                      ----------------------------------------------------------------------------
                                                 Multi-
                                       One-to  Family and
                                       Four-   Commercial                                                   Total
                                       Family  Real Estate Construction   Land     Consumer   Commercial    Loans
                                      -------- ----------- ------------ --------   ---------  ----------  ---------
                                                                     (In thousands)
Amounts due in:
<S>                                   <C>       <C>             <C>     <C>        <C>             <C>     <C>
   One year or less.................. $  5,360  $     103       $1,302  $   253    $  8,031        $159    $15,208
   More than one year to three years.      759        257           --      115       3,600         402      5,133
   More than three years to four years     762        532           --       14       1,146         103      2,557
   More than four years to five years      992        544           --      349       1,032          94      3,011
   More than five years to 10 years..    7,530      3,052           --      567         268          62     11,479
   More than 10 years to 15 years....   15,210      5,476           --      250          49          --     20,985
   More than 15 years................   21,826      2,584           --       --          --          --     24,410
                                      -------- ----------    ---------  --------   ---------     ------   --------
      Total amount due............... $ 52,439  $  12,548       $1,302   $1,548     $14,126        $820    $82,783
                                      ======== ==========    =========  ========   =========     ======   ========
</TABLE>

     The  following  table  presents,  the dollar  amount of all loans due after
September 30, 2001,  which have fixed  interest rates and floating or adjustable
interest rates.

                                        Due After September 30, 2001
                                 -------------------------------------------
                                   Fixed         Adjustable         Total
                                 ----------      ----------       ---------
                                               (In thousands)

Real estate loans:
   One- to four-family..........  $22,997         $24,082          $47,079
   Multi-family.................       --              51               51
   Commercial...................    7,314           5,080           12,394
   Construction.................       --              --               --
   Land.........................      583             712            1,295
                                  -------         -------          -------
      Total real estate loans...   30,894          29,925           60,819
Consumer loans..................      364           5,731            6,095
Commercial loans................      661              --              661
                                  -------         -------          -------
      Total loans...............  $31,919         $35,656          $67,575
                                  =======         =======          =======


     Loans to One Borrower. The maximum amount that Newberry Federal may lend to
one borrower is limited by regulation. At September 30, 2000, Newberry Federal's
regulatory limit on loans to one borrower was $5.2 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  $3.6 million and consisted of commercial real estate loans, lines
of credit and one-to-four family loans. These loans were performing according to
their original terms at September 30, 2000.

     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.

     When  Newberry  Federal has sold  loans,  it  generally  has  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,  2000,  Newberry  Federal  was
servicing $20.4 million of loans for others.  Gains, net of origination expense,
from the sale of such loans are  recorded at the time of sale.  Generally a loan
is  committed  to be sold and a price  for the loan is fixed  after  the loan is
approved and the interest rate is accepted by the customer.  This eliminates the
risk to Newberry  Federal that a rise in market  interest  rates will reduce the
value of a mortgage before it can be sold.

                                       10

<PAGE>

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

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

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

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

      Commercial......................................     4,093        1,798
                                                        --------    ---------
            Total loans originated....................    26,743       26,979
                                                        --------    ---------

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

     Loan   Commitments.   Newberry  Federal  issues  loan  commitments  to  its
prospective   borrowers   conditioned  on  the  occurrence  of  certain  events.
Commitments  are made in  writing  on  specified  terms and  conditions  and are
honored for up to 30 days from approval. At September 30, 2000, Newberry Federal
had loan  commitments  and  unadvanced  loans and lines of credit  totaling $8.5
million.

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

     Newberry Federal charges loan origination fees for mortgage loans which are
calculated  as a percentage  of the amount  borrowed.  As required by applicable
accounting  principles,  loan origination fees, discount points and certain loan
origination  costs are deferred and recognized  over the  contractual  remaining
lives of the related  loans on a level  yield  basis.  At  September  30,  2000,
Newberry  Federal had  $104,000 of net  deferred  loan costs.  Newberry  Federal
amortized  $4,300 of net deferred loan costs during the year ended September 30,
2000.

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

                                       11

<PAGE>

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

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

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

<TABLE>
<CAPTION>
                                                                                   At September 30,
                                                                    -----------------------------------------------
                                                                      2000      1999     1998      1997      1996
                                                                    --------  -------- --------  --------  --------
                                                                                (Dollars in thousands)

Nonaccruing loans:
<S>                                                                     <C>       <C>      <C>       <C>      <C>
   One- to four-family real estate................................      $111      $149     $207      $100     $  56
   Multi-family...................................................        --        --       --        --        --
   Commercial real estate.........................................        --        --       --        --        --
   Construction...................................................        --        --       --        --        --
   Land...........................................................        --        --       --        --        --
   Consumer.......................................................        22        14       62        65        30
                                                                      ------    ------   ------    ------    ------
      Total.......................................................       133       163      269       165        86
Real estate owned(1)..............................................        --        --        1         1       833
Other repossessed assets..........................................        22        14       18         3        --
                                                                      ------    ------   ------   -------    ------
      Total nonperforming assets(2)...............................       155       177      288       169       919
Troubled debt restructurings......................................        30        66       96        73        30
                                                                      ------    ------   ------   -------    ------
Troubled debt restructurings and
  total nonperforming assets......................................      $185      $243     $384      $242      $949
                                                                      ======    ======   ======   =======    ======
Total nonperforming loans and troubled debt
   restructurings as a percentage of total loans..................      0.20%     0.30%    0.51%     0.35%     0.18%
Total nonperforming assets and troubled debt
   restructurings as a percentage of total assets.................      0.08%     0.12%    0.21%     0.14%     0.59%
</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, 2000, had nonaccruing  loans been current  according to their original terms
amounted to  approximately  $12,199.  Newberry  Federal  included income on such
loans of $4,677 in total interest income for the year ended September 30, 2000.

                                       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,
                                          ------------------------------------------------------------------------
                                                         2000                                 1999
                                          -----------------------------------  -----------------------------------
                                             60-89 Days      90 Days or More      60-89 Days      90 Days or More
                                          ----------------- -----------------  ----------------- -----------------
                                           Number Principal  Number Principal   Number Principal  Number Principal
                                            of     Balance    of     Balance     of     Balance    of     Balance
                                           Loans   of Loans  Loans   of Loans   Loans   of Loans  Loans   of Loans
                                          ------- --------- ------- ---------  ------- --------- ------- ---------
                                                                   (Dollars in thousands)

Real estate loans:
<S>                                           <C>     <C>        <C>    <C>        <C>     <C>        <C>    <C>
   One- to four-family..................      20      $518       5      $119       21      $620       8      $149
   Multi-family.........................      --        --      --        --       --        --      --        --
   Commercial...........................       2        24      --        --        4       174      --        --
   Construction.........................      --        --      --        --       --        --      --        --
   Land.................................      --        --      --        --       --        --      --        --
Consumer loans:
   Second mortgage loans, home
     equity loans and lines of credit...      --        --      --        --        5        44      --        --
   Automobile...........................      --        --      --        --        5        47      --        --
   Other................................       4         9       3         5        5        17       4        14
Commercial loans........................      --        --      --        --        4        68      --        --
                                           -----     -----   -----    ------      ---     -----      --     -----
      Total.............................      26      $551       8      $124       44      $970      12      $163
                                           =====     =====   =====    ======      ===     =====      ==     =====

Delinquent loans to total loans.........              0.67%             0.15%              1.26%             0.20%
</TABLE>

     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, 2000, Newberry Federal
had no real estate owned and $22,000 of repossessed personal property.

     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."

                                       13

<PAGE>

     The following table sets forth classified assets at September 30, 2000.

<TABLE>
<CAPTION>
                                        Loss               Doubtful            Substandard       Special Mention
                                 -------------------  -------------------  ------------------- -------------------
                                 Principal Number of  Principal Number of  Principal Number of Principal Number of
                                  Balance    Loans     Balance    Loans     Balance    Loans    Balance    Loans
                                 --------- ---------  --------  ---------  --------  --------- --------- ---------
                                                              (Dollars in thousands)

Real estate loans:
<S>                                <C>       <C>        <C>       <C>        <C>        <C>       <C>       <C>
   One- to four-family..........      --        --        --         --      $328         13        --        --
   Multi-family.................      --        --        --         --        18          1        --        --
   Commercial...................      --        --        --         --        --         --        --        --
   Construction.................      --        --        --         --        --         --        --        --
   Land.........................      --        --        --         --        --         --        --        --
Consumer loans:
   Second mortgage loans,
   home equity loans and
     lines of credit............      --        --        --         --        --         --        --        --
   Automobile...................      --        --        --         --        --         --        --        --
   Other........................      --        --        --         --        39         16        --        --
Commercial loans................      --        --        --         --         8          1        --        --
                                    ----      ----      ----       ----      ----       ----      ----      ----
      Total.....................      --        --        --         --      $393         31        --        --
                                    ====      ====      ====       ====      ====       ====      ====      ====
Delinquent loans to
   total loans..................      --                  --                  .47%                  --
</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 of the collectibility of the loan portfolio,  including
past loan loss  experience,  known and inherent risks in the portfolio,  adverse
situations that may affect the borrower's  ability to repay, the estimated value
of any underlying collateral, and current economic conditions.

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

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

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

     Although management believes that it uses the best information available to
establish the allowance for loan losses, future adjustments to the allowance for
loan  losses may be  necessary  and  results of  operations  could be  adversely
affected if  circumstances  differ  substantially  from the assumptions  used in
making the determinations. Furthermore,

                                       14

<PAGE>

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.

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

<TABLE>
<CAPTION>
                                                                    Year Ended September 30,
                                                       --------------------------------------------------
                                                         2000      1999       1998      1997      1996
                                                       --------- ---------  --------  --------- ---------
                                                                     (Dollars in thousands)
<S>                                                         <C>       <C>       <C>        <C>       <C>
Allowance for loan losses, beginning of year.........       $184      $181      $192       $227      $265
Charged-off loans:
   One- to four-family real estate...................         --         5        16          4         1
   Multi-family......................................         --        --        --         --        --
   Commercial real estate............................         --        --        --         --        --
   Construction......................................         --        --        --         --        --
   Land..............................................         --         1        --         --        --
   Commercial........................................         --        --        --         --        --
   Consumer..........................................        150       161       106        144        59
                                                           -----     -----     -----      -----     -----
      Total charged-off loans........................        150       167       122        148        60
Recoveries on loans previously charged off:
   One- to four-family real estate...................         --         1        --         18        --
   Multi-family......................................         --        --        --         --        --
   Commercial real estate............................         --        --        --         --        --
   Construction......................................         --        --        --         --        --
   Land..............................................         --        --        --         --        --
   Commercial........................................         --        --        --         --        --
   Consumer..........................................         91        27        26         24        22
                                                           -----     -----    ------     ------    ------
      Total recoveries...............................         91        28        26         42        22
Net loans charged-off................................         59       139        96        106        38
Provision for loan losses............................        340       142        85         70        --
                                                           -----     -----    ------     ------    ------
Allowance for loan losses, end of period.............       $465      $184      $181       $191      $227
                                                           =====     =====    ======     ======    ======

Net loans charged-off to average interest-earning loans     0.19%     0.18%     0.14%      0.17%     0.06%
Allowance for loan losses to total loans.............       0.56%     0.24%     0.25%      0.28%     0.36%
Allowance for loan losses to nonperforming
   loans and troubled debt restructurings............     251.48%    80.79%    49.59%     80.25%   195.69%
Net loans charged-off to allowance for loan losses...      32.26%    74.59%    52.49%     55.50%    16.74%
Recoveries to charge-offs............................      60.67%    17.37%    22.13%     28.38%    36.67%
</TABLE>

                                       15

<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,
                              ----------------------------------------------------------------------------------
                                         2000                        1999                         1998
                              --------------------------- ---------------------------  -------------------------
                                      Percent   Percent           Percent    Percent          Percent   Percent
                                      Allowance of Loans          Allowance  of Loans         Allowance of Loans
                                      in each   in Each           in each    on Each          in each   on Each
                                      Category  Category          Category   Category         Category  Category
                                      to Total  to Total          to Total   of 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.................. $140      30.11%    81.94%  $  85     45.95%    80.61%   $118      65.19%   78.15%
Consumer.....................  325      69.89     17.07     100     54.05     16.92      63      34.81    18.23
Commercial...................   --         --        --      --        --        --      --         --       --
                              ------  ---------            ------ ---------            ------  ---------
   Total allowance
     for loan losses......... $465     100.00%             $185    100.00%             $181     100.00%
                              ======  =========            ====== =========            ======  =========
<CAPTION>
                                                 At September 30,
                              -------------------------------------------------------
                                        1997                        1996
                              --------------------------  ---------------------------
                                      Percent   Percent           Percent    Percent
                                      Allowance of Loans          Allowance  of Loans
                                      in each   in Each           in each    on Each
                                      Category  Category          Category   Category
                                      to Total  to Total          to Total   of Total
                              Amount  Allowance   Loans   Amount  Allowance   Loans
                              ------ ---------  --------  ------  --------- ---------
                                               (Dollars in thousands)
<S>                            <C>      <C>       <C>      <C>       <C>       <C>
Real estate.................   $164     85.86%    77.85%   $209      92.07%    81.08%
Consumer....................     27     14.14     19.12      18       7.93     16.71
Commercial..................     --        --        --      --         --        --
                             ------    ------             -----     ------
   Total allowance
     for loan losses........   $191    100.00%             $227     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, Newberry Federal has
maintained a significant investment in investment securities and mortgage-backed
securities  classified  as  available-for-sale.  Newberry  Federal's  investment
securities consist primarily of U.S. Government and agency obligations. Newberry
Federal's  mortgage- backed securities consist of U.S.  Government agency issues
as well as investment grade private issues.  Newberry  Federal's  investment and
mortgage-backed securities generally have average life of less than 15 years.

                                       16

<PAGE>


     Newberry Federal's investment policy permits Newberry Federal 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.

     Newberry  Federal  maintains  a trading  account  for  certain  classes  of
collateralized mortgage obligations. At September 30, 2000, Newberry Federal had
no securities classified as "trading securities."

     All of Newberry Federal's  investment and mortgage-backed  securities carry
market  risk  insofar  as  increases  in market  rates of  interest  may cause a
decrease in their market value,  which would lower  Newberry  Federal's  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 Newberry
Federal may have to invest the funds at a lower interest rate.

     At September 30, 2000,  Newberry  Federal's  investment in  mortgage-backed
securities  had an  aggregate  book  value in  excess  of  251.00%  of  Newberry
Federal's retained earnings at that date, with an aggregate book value of $109.8
million or 28.49% of retained earnings.

                                       17

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                    At September 30,
                                                                      --------------------------------------------
                                                                              2000                    1999
                                                                      ---------------------   --------------------
                                                                      Amortized     Fair      Amortized     Fair
                                                                        Cost       Value         Cost       Value
                                                                      ----------  ---------   ---------  ---------
                                                                                     (In thousands)

Investment securities:
<S>                                                                   <C>         <C>         <C>         <C>
   Debt securities held-to-maturity:
      Obligations of U.S. government agencies........................ $       --  $      --   $      --   $     --
      Other securities...............................................      1,091      1,091       1,091      1,091
                                                                      ----------  ---------   ---------   --------
            Total....................................................      1,091      1,091       1,091      1,091

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

   Equity securities available-for-sale:
      Federal Home Loan Bank stock...................................      1,882      1,882       1,962      1,962
      Mutual funds...................................................      1,061        915       1,057        914
      Other securities...............................................         72         91          72         80
                                                                      ----------  ---------   ---------   --------
        Total........................................................      3,015      2,888       3,091      2,956

   Equity securities held-to-maturity:
      Other securities...............................................         50         50          50         50
            Total debt and equity securities.........................     28,570     25,914      25,719     23,208
                                                                      ----------  ---------   ---------   --------


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


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

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

                                       18

<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,
                                                                      ----------------------
                                                                        2000         1999
                                                                      --------    ----------
                                                                          (In thousands)

Mortgage-backed securities:
<S>                                                                   <C>           <C>
   Mortgage-backed securities, beginning of period (1)............    $101,351      $ 91,971
   Purchases:
     Mortgage-backed securities - held-to-maturity................          --            --
     Mortgage-backed securities - available-for-sale..............      48,233       102,695
   Sales:
     Mortgage-backed securities - available-for-sale..............     (25,380)      (55,720)
   Repayments and prepayments:
     Mortgage-backed securities...................................     (14,215)      (35,230)
   Increase (decrease) in net premium.............................         294           183
   Increase (decrease) in unrealized gain.........................        (443)       (2,548)
                                                                      ---------     ---------
       Net increase (decrease) in mortgage-backed securities......       8,489         9,380
                                                                      ---------     ---------
   Mortgage-backed securities, end of period......................    $109,840      $101,351
                                                                      =========     ========
Investment securities:

   Investment securities, beginning of period (2).................     $23,209      $  7,888
   Purchases:
     Investment securities - held-to-maturity.....................          --         1,141
     Investment securities - available-for-sale...................       2,313        22,562
     Investment securities - trading..............................       3,336            --
   Sales:
     Investment securities - available-for-sale...................        (275)       (4,892)
     Investment securities - trading..............................      (3,336)           --
   Calls:
     Investment securities - held-to-maturity.....................          --        (1,352)
     Investment securities - available-for-sale...................          --            --
   Maturities:
     Investment securities - held-to-maturity.....................          --            --
     Investment securities - available-for-sale...................          --            --
   Increase (decrease) in net premium.............................         814           283
   Increase (decrease) in unrealized gain.........................        (147)       (2,421)
                                                                      ---------     --------
       Net increase (decrease) in investment securities...........       2,705        15,321
                                                                      ---------     --------
   Investment securities, end of period...........................     $25,914       $23,209
                                                                      =========     ========
</TABLE>
---------------
(1)  Includes mortgage-backed securities available-for-sale.
(2)  Includes investment securities available-for-sale.

                                       19

<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, 2000.

<TABLE>
<CAPTION>

                                                                At September 30, 2000
                                        -----------------------------------------------------------------
                                                                   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)

Held-to-maturity securities:
   Investment securities:
      Municipal securities (1)........     $1,091    7.46%    $  --        --% $       --        --%
      Obligations of U.S.
         Government agencies..........         --     --         --        --          --        --
      Mortgage-backed securities......         --     --         --        --          --        --
                                           ------             ------                 -----
         Total securities at
            amortized cost............     $1,091    7.46%    $  --        --        $ --        --
                                           ======             ======                 =====

Available-for-sale securities:
   Investment securities:
      Obligations of U.S. Treasury....     $   --      --%    $  --        --% $       --        --%
      Obligations of U.S.
         Government agencies..........      1,672    6.54        --        --          --        --
      Equity securities...............         --      --        --        --          --        --
      Mutual funds....................         --      --        --        --          --        --
   Mortgage-backed securities.........         --      --        --        --         930      7.27
                                           ------   -----     ------      -----      -----     -----

         Total securities at fair value    $1,672    6.54%    $  --        --%       $930      7.27%
                                           ======             ======                 =====
<CAPTION>

                                                    At September 30, 2000
                                        ---------------------------------------------

                                              More than
                                              Ten Years                Totals
                                        ----------------------  ---------------------
                                                     Weighted               Weighted
                                         Carrying     Average    Carrying    Average
                                           Value       Yield      Value       Yield
                                        -----------  ---------  ----------  ---------
                                                     (Dollars in thousands)

Held-to-maturity securities:
<S>                                      <C>          <C>       <C>          <C>
   Investment securities:
      Municipal securities (1)........   $    --         --%    $  1,091       7.46%
      Obligations of U.S.
         Government agencies..........        50         --           50         --
      Mortgage-backed securities......     3,875       6.24        3,875       6.98
                                         -------                --------
         Total securities at
            amortized cost............   $ 3,925       6.24       $5,016       7.02
                                         =======                ========

Available-for-sale securities:
   Investment securities:
      Obligations of U.S. Treasury....   $    --        --%     $     --         --%
      Obligations of U.S.
         Government agencies..........    20,213       8.24       21,885       8.11
      Equity securities...............     1,973       7.23        1,973       7.23
      Mutual funds....................       915       5.71          915       5.71
   Mortgage-backed securities.........   105,035       7.72      105,965       7.72
                                         -------     ------     --------     ------

         Total securities at fair value $128,136       7.78%    $130,738       7.76%
                                        ========                ========
</TABLE>

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

                                       20

<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, 2000 had no brokered deposits.

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

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

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

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

     The  following  table  indicates  the amount of  Newberry  Federal's  jumbo
certificates  of deposits by time  remaining  until maturity as of September 30,
2000.  Jumbo  certificates  of deposits have  principal  balances of $100,000 or
more.

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

Three months or less............     $  5,091            6.13%
Over 3 through 6 months.........        5,581            5.96
Over 6 through 12 months........       13,839            6.09
Over 12 months..................          --
                                     -------
      Total.....................     $ 24,511            6.09%
                                     ========

                                       21

<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,
                                      --------------------------------------------------------------
                                                   2000                              1999
                                      ------------------------------- ------------------------------
                                                  Percent                         Percent
                                                    of      Weighted                of      Weighted
                                      Average      Total     Average   Average     Total     Average
                                      Balance     Deposits    Rate     Balance    Deposits    Rate
                                      --------    --------   -------- ---------   --------  --------
                                                          (Dollars in thousands)
<S>                                   <C>           <C>       <C>     <C>          <C>        <C>
Passbook accounts...................  $ 17,177      11.38%    2.79%   $  17,588    12.61%     2.80%
NOW and money market
   accounts.........................    31,652      20.97     2.24       26,632    19.10      2.06
Certificates of deposit (1).........   102,092      67.65     6.06       95,220    68.29      5.20
                                      --------     ------             ----------  ------
      Total average deposits........  $150,921     100.00%            $ 139,440   100.00%
                                      ========     ======             ==========  ======
</TABLE>
--------------
(1)  Based on remaining maturity of certificates of deposit.

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

<TABLE>
<CAPTION>
                                                             Period to Maturity from September 30, 2000
                                                  -----------------------------------------------------------------
                                                                                 Over
                                                    Less           One            Two         Over
                                                  than One        to Two        to Three      Three
                                                    Year          Years          Years        Years         Total
                                                  --------      ----------      --------      ------      ----------
                                                                       (Dollars in thousands)
Certificates of deposit:
<S>                                                <C>          <C>           <C>            <C>          <C>
   0 to 2.00%................................      $   410      $     --      $     --       $  --        $     410
   2.01 to 4.00%.............................            9            --            --          --                9
   4.01 to 5.00%.............................        3,196           657           125           6            3,984
   5.01 to 6.00%.............................       49,466         2,579           454          47           52,546
   6.01 to 7.00%.............................       34,153         7,288           462         112           42,015
   7.01 to 8.00%.............................          794           648            30                        1,472
   8.01 to 9.00%.............................           --            --            --          --               --
                                                   -------      --------      ---------      ------       ---------
      Total certificates of
         deposit.............................      $88,028      $ 11,172      $  1,071       $ 165        $ 100,436
                                                   =======      ========      =========      ======       =========
</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, 2000,
Newberry  Federal had the ability to borrow up to  approximately  $56.2  million
from the Federal  Home Loan Bank of Atlanta.  At September  30,  2000,  Newberry
Federal had outstanding advances of $35.0 million.

     At September  30, 2000,  Newberry  Federal also  maintained an $6.5 million
unsecured credit facility with a third party financial institution. At September
30, 2000, Newberry Federal had an outstanding balance of $2.8 million under this
credit facility.

                                       22

<PAGE>

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

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

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

Subsidiary Activities

     DutchFork Bancshares' sole subsidiary is Newberry Federal. Newberry Federal
has one wholly owned  subsidiary,  Inter-Community  Service  Corporation,  which
operates  as an  insurance  agency  and  also  owns  approximately  30  acres of
residential land for development. At September 30, 2000, Inter-Community Service
Corporation's assets totaled approximately $781,000.

Personnel

     As of September 30, 2000,  Dutchfork  Bancshares had 42 full-time employees
and 12  part-time  employees,  none  of  whom  is  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 ("SAIF")  managed by the Federal  Deposit  Insurance
Corporation.  Newberry  Federal  must  file  reports  with the  Office of Thrift
Supervision  and  the  Federal  Deposit  Insurance  Corporation  concerning  its
activities and financial condition in addition to obtaining regulatory approvals
prior  to  entering  into  certain   transactions   such  as  mergers  with,  or
acquisitions of, other savings  institutions.  The Office of Thrift  Supervision
and/or the Federal Deposit Insurance  Corporation conduct periodic  examinations
to test Newberry  Federal's  safety and soundness  and  compliance  with various
regulatory   requirements.   This  regulation  and  supervision   establishes  a
comprehensive  framework of activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors.  The
regulatory structure also gives the regulatory  authorities extensive discretion
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,

                                       23

<PAGE>

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. Formerly, a
unitary  savings and loan holding  company was not 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."  Recent
legislation,  however,  restricts unitary savings and loan holding companies not
existing  or  applied  for before May 4, 1999 to  activities  permissible  for a
financial holding company as defined under the legislation,  including insurance
and securities  activities,  and those permitted for a multiple savings and loan
holding company as described  below.  DutchFork  Bancshares does not qualify for
the  grandfather  and is limited to such  activities.  If  DutchFork  Bancshares
acquires  another  savings  institution  or  savings  bank that is not a problem
institution,  that meets the qualified thrift lender test and that the Office of
Thrift Supervision  considers to be a savings institution,  DutchFork Bancshares
would  become a  multiple  savings  and loan  holding  company  if the  acquired
institution  is held as a  separate  subsidiary  and not  merged  into  Newberry
Federal.  As a multiple savings and loan holding company,  DutchFork  Bancshares
would generally be limited to activities  permissible for bank holding companies
under federal law so long as the Office of Thrift  Supervision first approves of
these activities, and to certain other activities authorized by Office of Thrift
Supervision regulation.

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

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

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

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

                                       24

<PAGE>

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 CAMEL  financial  institution  rating  system),  and,
together with the risk-based  capital  standard  itself,  a 4% Tier 1 risk-based
capital  standard.  The Office of Thrift  Supervision  regulations  also require
that,  in meeting the  tangible,  leverage  and  risk-based  capital  standards,
institutions  must generally  deduct  investments  in and loans to  subsidiaries
engaged in activities as principal that are not permissible for a national bank.

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

     The capital  regulations  also incorporate an interest rate risk component.
Savings institutions with "above normal" interest rate risk exposure are subject
to a deduction from total capital for purposes of calculating  their risk- based
capital requirements. For the present time, the Office of Thrift Supervision has
deferred  implementation  of the interest rate risk capital charge. At September
30, 2000, Newberry Federal met each of its capital requirements.

     The  following  table  presents  Newberry  Federal's  capital  position  at
September 30, 2000.

<TABLE>
<CAPTION>
                                                                                         Capital
                                                                            ---------------------------------
                         Actual           Required           Excess             Actual           Required
                         Capital           Capital           Amount            Percent            Percent
                    -----------------   -------------   -----------------   --------------    ---------------
                                                     (Dollars in thousands)
<S>                      <C>              <C>                <C>                <C>                 <C>
Tangible............     $34,738          $4,550             $30,188            15.27%              1.50%
Core (Leverage).....      34,738           9,100              25,638            15.27               4.00
Risk-based..........      35,181           8,703              26,478            32.34               8.00
</TABLE>

     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

                                       25

<PAGE>

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

     In  addition to the  assessment  for deposit  insurance,  institutions  are
required  to make  payments on bonds  issued in the late 1980s by the  Financing
Corporation  ("FICO") to recapitalize the predecessor to the SAIF.  During 1999,
FICO  payments  for SAIF  members  approximated  6.1 basis  points,  while  Bank
Insurance  Fund ("BIF")  members  paid 1.2 basis  points.  By law,  SAIF and BIF
members  began equal  sharing of FICO  payments on January 1, 2000.  The Federal
Deposit Insurance Corporation has authority to increase insurance assessments. A
significant  increase in SAIF  insurance  premiums  would likely have an adverse
effect on the operating  expenses and results of operations of Newberry Federal.
Management cannot predict what insurance assessment 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, 2000,  Newberry  Federal's  limit on loans to one borrower was $5.2 million,
and Newberry  Federal's  largest aggregate  outstanding  balance of loans to one
borrower was $3.6 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, 2000, Newberry Federal maintained 100% of its
portfolio  assets  in  qualified  thrift  investments  and,  therefore,  met the
qualified  thrift  lender test.  Recent  legislation  has expanded the extent to
which  education  loans,  credit  card  loans  and small  business  loans may be
considered "qualified thrift investments."

    Limitation  on  Capital   Distributions.   Office  of  Thrift   Supervision
regulations  impose  limitations  upon all  capital  distributions  by a savings
institution,  including  cash  dividends,  payments to repurchase its shares and
payments  to  shareholders  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

                                       26

<PAGE>

of Thrift  Supervision  could prohibit a proposed  capital  distribution  by any
institution, which would otherwise be permitted by the regulation, if the Office
of Thrift  Supervision  determines that such  distribution  would  constitute an
unsafe or unsound practice.

     Liquidity.  Newberry  Federal is  required  to  maintain  an average  daily
balance of specified liquid assets equal to a monthly average of not less than a
specified  percentage of its net  withdrawable  deposit accounts plus short-term
borrowings.  This liquidity requirement is currently 4%, but may be changed from
time to time by the Office of Thrift  Supervision to any amount within the range
of 4% to 10%.  Monetary  penalties  may be  imposed  for  failure  to meet these
liquidity  requirements.  Newberry  Federal's  liquidity ratio for September 30,
2000 was 78.8%, which exceeded the applicable requirements. Newberry Federal has
never been  subject to  monetary  penalties  for  failure to meet its  liquidity
requirements.

     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, 2000 totaled
$51,000.

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

     Enforcement.  The  Office of Thrift  Supervision  has  primary  enforcement
responsibility over savings  institutions and has the authority to bring actions
against  the  institution  and  all  institution-affiliated  parties,  including
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 $27,500 per day, or even $1.2 million per day in especially  egregious
cases. The Federal Deposit Insurance  Corporation has the authority to recommend
to the Director of the Office of Thrift  Supervision that enforcement  action to
be taken with  respect to a  particular  savings  institution.  If action is not
taken by the Director,  the Federal Deposit Insurance  Corporation has authority
to take such action under certain  circumstances.  Federal law also  establishes
criminal penalties for certain violations.

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

                                       27

<PAGE>

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 at September 30, 2000 of $1,882,000.

     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:
for accounts  aggregating  $42.8  million or less  (subject to adjustment by the
Federal  Reserve  Board)  the  reserve  requirement  is  3%;  and  for  accounts
aggregating  greater  than $44.3  million,  the  reserve  requirement  is $1.284
million plus 10% (subject to adjustment by the Federal  Reserve Board between 8%
and 14%) against that portion of total  transaction  accounts in excess of $42.8
million.  The first $5.5 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."

                           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 2000 taxable
year,  DutchFork  Bancshares is subject to a maximum  federal income tax rate of
34%.

                                       28

<PAGE>

     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.

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.

                                       29

<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTIES

Properties

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

<TABLE>
<CAPTION>
                                                                                                    Net Book Value
                                                                       Leased,       Original       of Property at
                                                                     Licensed or       Year         September 30,
Location                                                                Owned        Acquired            2000
---------                                                            -----------     ---------     ----------------
                                                                                                    (In thousands)
<S>                                                                  <C>             <C>           <C>
Main/Executive Office:
1735 Wilson Road
Newberry, South Carolina  29108.................................        Owned          1993            $2,448

Branch Offices:
1323 College Street
Newberry, South Carolina  29108.................................        Owned          1993               201

127 Amicks Ferry Road (1)
Chapin, South Carolina  29036...................................        Owned          1987                91

101 N. Wheeler Street
Prosperity, South Carolina  29127...............................        Owned          1989                79
</TABLE>

(1)  On December  20,  2000,  Newberry  Federal  and First  Community  Bank,  NA
     announced  the signing of a definitive  agreement by which First  Community
     Bank, NA will purchase the Chapin branch office.

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.

                                     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' 2000 Annual Report to Stockholders on page 55.

                                       30

<PAGE>

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' 2000 Annual Report to Stockholders on pages 5 through 14.

ITEM 7.  FINANCIAL STATEMENTS

     The information  regarding  financial  statements is incorporated herein by
reference to DutchFork  Bancshares'  2000 Annual Report to Stockholders on pages
15 through 53.

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

     None.

                                    PART III

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

     The  information  relating  to the  directors  and  officers  of  DutchFork
Bancshares  and  information  regarding  compliance  with  Section  16(a) of the
Exchange Act is incorporated herein by reference to DutchFork  Bancshares' Proxy
Statement for the 2001 Annual Meeting of Stockholders at pages 4 through 6.

ITEM 10. EXECUTIVE COMPENSATION

     The information regarding executive  compensation is incorporated herein by
reference to DutchFork  Bancshares'  Proxy Statement for the 2001 Annual Meeting
of Stockholders at pages 6 through 8.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information relating to security ownership of certain beneficial owners
and  management  is  incorporated  herein by reference to DutchFork  Bancshares'
Proxy  Statement for the 2001 Annual Meeting of  Stockholders at pages 3 through
4.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information relating to certain  relationships and related transactions
is incorporated herein by reference to DutchFork Bancshares' Proxy Statement for
the 2001 Annual Meeting of Stockholders at page 9.

                                       31

<PAGE>



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

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

               o    Independent Auditors' Report

               o    Consolidated   Statements  of  Financial   Condition  as  of
                    September 30, 2000 and 1999

               o    Consolidated  Statements  of  Income  for  the  Years  Ended
                    September 30, 2000 and 1999

               o    Consolidated Statements of Comprehensive  Operations for the
                    Years Ended September 30, 2000 and 1999

               o    Consolidated  Statements of Changes in Stockholders'  Equity
                    for the Years Ended September 30, 2000 and 1999

               o    Consolidated  Statements  of Cash Flows for the Years  Ended
                    September 30, 2000 and 1999

               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
               10.2 Newberry  Federal  Savings Bank  Employment  Agreement  with
                    Steve P. Sligh
               10.3 DutchFork  Bancshares,  Inc.  Employment  Agreement  with J.
                    Thomas Johnson
               10.4 DutchFork  Bancshares,  Inc. Employment Agreement with Steve
                    P.Sligh
               10.5 Newberry    Federal   Savings   Bank   Employee    Severance
                    Compensation Plan
               10.6 Newberry   Federal  Savings  Bank   Supplemental   Executive
                    Retirement Plan
               10.7 Adoption  Agreement for Employees'  Savings & Profit Sharing
                    Plan and Trust(1)
               13.0 Annual Report to Stockholders
               21.0 Subsidiary  information is incorporated  herein by reference
                    to Part I, Item 1, "Business-Subsidiary Activities."
               23.0 Consent of Clifton D. Bodiford, CPA
               27.0 Financial Data Schedule

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

     (b)  Reports on Form 8-K

     None.

                                       32

<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 27, 2000            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 27, 2000
---------------------------  Officer and Chairman of the Board
J. Thomas Johnson            (principal executive officer)


/s/ Steve P. Sligh           Executive Vice President, Chief          December 27, 2000
---------------------------  Financial Officer, Treasurer
Steve P. Sligh               and Director (principal financial and
                             accounting officer)


/s/ Robert E. Livingston     Corporate Secretary and Director         December 27, 2000
---------------------------
Robert E. Livingston

/s/ Keitt Purcell            Director                                 December 27, 2000
---------------------------
Keitt Purcell

/s/ Robert W. Owen           Director                                 December 27, 2000
---------------------------
Robert W. Owen

/s/ James E. Wiseman         Director                                 December 27, 2000
---------------------------
James E. Wiseman
</TABLE>

                                       33